PRC Economy and Industry: News and Discussions

[Waylan]

I came back five years later China moving on to higher station that guy is still stuck with Econ 101. Next five years China will be moving on to even higher station and he still will be talking Econ 101. Haha.

[vina]

I came back five years later China moving on to higher station that guy is still stuck with Econ 101. Next five years China will be moving on to even higher station and he still will be talking Econ 101. Haha.

. You can come back after even a 100 years if need be and maybe even after you reach the moon. You cannot escape the basics. For eg, even when you go to the moon, you will discover a pesky little thing called the laws of gravity (high school physics 101).

The only difference is, economic laws are not quick acting like the laws of natural science, but it acts over time and does act suddenly when the make believe cannot be sustained any more. It happens like the proverbial straw that broke the camel's back. Usually some sort of external /internal shock. Don't discount it. I would suggest an excellent book called "Fooled By Randomness" , which talks about such things in easy to understand everyday language.

[vina]

OK, let me to give some explanations.

- China railways, especially in that region, is delivering coal, and at a scale many in this forum could hardly imagine. The railway around that region is among the most modern railways in the world.
- Even so it can not meet the needs of the fast increasing economy. So many people have to hire trucks to transport their coal, through the nation's vast expressway network.

Ok. So why didn't the ever so smart and all powerful CPC govt build the powerplants in the empty Mongolian steppes right on the coal seams and build HVDC lines of massive capacity to the east coast ?.

That is the best way to do it and not to build some 100000000 km of extra rail lines and transport 600M tons of coal to the coasts , to the powerplants and other infrastructure built on thickly populated lands on the east coast . To me all this railway building and hauling 600M tons and the consequent need for that is a massive waste of resources and a terrible and massive mis-allocation of capital and total waste of resources that cannot be stanched. It will be an open wound that will continue to bleed the Chinese long term.

Remember, in a typical diesel engine on a truck roughly 1/5 to a 1/4 the of the energy fuel burnt goes to the wheels, the rest is wasted!. And on top of that you take the coal and burn it in highly polluting , low thermal factor plants (33% efficiency) that are focused on lowering initial cost rather than the thermal efficiency (a clear consequence of subsidizing coal, it sets up such perverse economic incentives) . In a modern combined cycle coal plant, you achieve 50% to 60% thermodynamic efficiency so, even if you transmit it at just 80% efficiency and a good 20% loss over modern HVDC lines, you get far better overall system efficiency . Lets face it. The bulk of the power plants in China are hugely sub-scale and highly inefficient.

The problem with the CPC kind of "directed" development with little debate is that you can and will make monumental mistakes that are very difficult to correct. This is the flip side of "quick and efficient decision making". Think the Shanghai Maglev. It is a white elephant if there ever was one.

Though you may not realize it right now, I think China will regret the build out of those rail capacity and burning of 600MT of coal one day. No , not now when the going is good and it looks like you can fully sustain and afford it, but rather when there is tough times and the party stops. Think Dubai and it's massive credit financed investment bubble and what happened when the music stopped when a shock (financial crisis) hit.

[Raja Bose]

I came back five years later China moving on to higher station that guy is still stuck with Econ 101. Next five years China will be moving on to even higher station and he still will be talking Econ 101. Haha.

Because My Dear, regardless of how "high" of a station your country gets to, if you forget the basics (Econ 101), you will come crashing down. Look at US and its housing crisis. Haha indeed.

[naren]

OK, let me to give some explanations.

- China railways, especially in that region, is delivering coal, and at a scale many in this forum could hardly imagine. The railway around that region is among the most modern railways in the world.
- Even so it can not meet the needs of the fast increasing economy. So many people have to hire trucks to transport their coal, through the nation's vast expressway network.

Ok. So why didn't the ever so smart and all powerful CPC govt build the powerplants in the empty Mongolian steppes right on the coal seams and build HVDC lines of massive capacity to the east coast ?.

Obviously, trains travel much faster than electricity & hence more effecient....

Hey, thats what the govt said ! How dare you question the govt ? That is blasphemy !!!

[Hari Seldon]

The humane belief that PRC has reached escape velocity (from the laws of Econ 101) is reminiscent of classic bubble mania only. I'd rather we not prick these bubbles now. The bigger they grow, the better will be the lesson learnt at the end of the day, some say.

[naren]

- Compared with talking, Chinese prefer doing

Ironically, the very first chapter of the "bible" of Chinese strategy - The Art of War - is entitled "Laying Plans".

the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat

Mao will be so proud !

[wlin]

It seems you found another reason why China WILL collapse.
Before Congratulations, some number shared with you.
The highway is the bottleneck of transportation from ShanXi, Inner Mongolia to Beijing and Heibei, Shandong. The mountain there is very hard to build tunnels. China’s strategy missile is there using the mountain body as shell because they are pure rock. You can look at Google Map for a reference.

But currently there are still more that half dozen rails connected Shanxi, Inner Mongolia to the outside world. Like Daqin which can trans 400M ton of coal per year. But it still not enough, because the production is simply too huge. The Shanxi produces 750M ton coal per year and Inner Mongolia is about produce 800M tons. Compare them to any other country in the world, you will understand the size of it and what the transportation demand is like. So transport all 1.4 billion tons of coal outside those two provinces required a lot of rails, high way etc. Even 10% of them on the road, you will see huge jam. To imagine that, go to google the rail capacity of any country to see if there is any other country can handle this kind capacity easily.

The rails there are always busy so if you are not scheduled years ago then you will not get any capacity when you need them. That is why those heavy trucks are needed. The usage of coal is not limited to generating electricity. Only half of China’s coal is used in generating electricity. Unlike India, we have a tough winter, that needs a lot of coal. Also industrial needs coal like steal and building material. All these demand is difficult to be planned ahead. In fact, most of the heavy trucks do not trans coal to power plant. Power plants have the highest priority in schedule rail capacity.

China's Growth Leads to Problems down the road

Something is fundamentally wrong with the Chinese economy. From what is written it seems that the Traffic Jams are not going anywhere. The reason seems to be moving coal for power plants by trucks!. I cant believe it. It is done nowhere in the world. Bulk commodities are never moved by road over any big distance but rather by rail or water. There is no other way of doing it. For eg a moderately sized 60,000 ton bulk coal carrier / one train load will take around 1200 of those trucks off the roads . I cant believe that the Chinese rail system cannot put some 10 extra trains between Mongolia and Beijing!. Even for oil and gas, the best way to transport is via pipelines which are laid across country as a web and not by road/rail!

Best of all, haven't the Chinese heard of pit head generation ? It is far easier to build ultramega pit head stations in inner mongolia right over the coal seams and transport the electricity via HVDC transmission to the consumption centers.

In India power plants are simply not allowed to come up until the fuel and infrastructure linkages are in place. For an economy like the US based on rational costing for inputs and rational market determined pricing for power, such kind of harebrained schemes like transporting bulk cargoes by truck is simply not on. Cant happen.

I think it is basically because of the subsidized coal and hence subsidized power and cheap fuel, we have monstrosities like this Chinese jam happening. No wonder they are the largest consumers of power, coal and a skyrocketing import of petroleum fuels and other things. Sorry. We this cant last and a breaking point will be reached when the system will have to collapse. We saw it earlier in the Soviet Union. In the end, it is the most EFFICIENT economy that is sustainable and China has all the hall marks of a massive state directed wasteful economy that simply wastes most of it's resources and such terribly low factor productivity. Econ 101 I am afraid. Not sustainable.

[wlin]

The size matters. China already built a lot power plant at ports. Maybe 300,000MW or more. A lot of coal from Shanxi and Inner Mongolia will be transport to ports in Hebei and then transport to South China. The Daqin capacity is 400M ton per year and link Shanxi and Qinhuandao port which is the largest port in the world with capacity 200M tons. Compare it to the port your are talking about. You won’t know the real meaning of it without compare.

China's Growth Leads to Problems down the road

In India power plants are simply not allowed to come up until the fuel and infrastructure linkages are in place.

Very true. One can find long lists of cos waiting for coal linkages on GoI websites. You either get your coal from PSUs like MCL,WCL etc or you get permission to use imported coal in a blended format along with domestic coal. Even then the govt maintains strict control over blending (i.e. import) levels. Of course once imported, the coal will move on rails from ports to power plants.

And this precisely is the reason behind the massive spurt in mega thermal power plants planned along the coast - you place your plant close to the coast so that the coal covers minimum distance off the ships. Case in point is the setup in and around Krishnapatnam Port in AP - apparently multiple thermal power stations adding upto an annual coal consumption of 60 million tonnes are planned there to exploit the available port access!

Wonder why the PRC wunderkids (whose specialty seems to be top-notch infra!!) overlooked this simple aspect that even boor SDREs can see. As vina saar alludes to above, it must be the unhealthy level of subsidies - else the total logistics cost and time taken by the cargo to reach factory doorstep would make truck/road transport options downright unviable given the massive volumes (600mmtpa+!!) involved.

[manish]

The size matters. China already built a lot power plant at ports. Maybe 300,000MW or more. A lot of coal from Shanxi and Inner Mongolia will be transport to ports in Hebei and then transport to South China. The Daqin capacity is 400M ton per year and link Shanxi and Qinhuandao port which is the largest port in the world with capacity 200M tons. Compare it to the port your are talking about. You won’t know the real meaning of it without compare.

wlin, I am not trying to compare Daqin or Qinhuando with any port in India. Try to read my post again if you did not get it. I do realize and acknowledge that infra is something that PRC is pretty good at. If you did not get that, let me help you with it:

Wonder why the PRC wunderkids (whose specialty seems to be top-notch infra!!) overlooked this simple aspect that even boor SDREs can see. As vina saar alludes to above, it must be the unhealthy level of subsidies - else the total logistics cost and time taken by the cargo to reach factory doorstep would make truck/road transport options downright unviable given the massive volumes (600mmtpa+!!) involved.

See - the point is not how much capacity your ports have. The point is the uncontrolled proliferation of massive coal consuming plants in the interior in places that are faraway from sources of coal - be it domestic coal mines or ports that bring in the imported coal AND the reason for such misallocations of capital.

If I am not mistaken, this was vina's intention too. Nobody here is dumb enough to compare India's port infra or the volumes handled at Indian ports to that of PRC and claim that India is ahead.

OT alert:
Heck, India may not even need the kind of ports capacity that China has considering
a) We are less export oriented (relatively) - lot less containers need to sail in and out of our ports
b) China imports 400mmtpa+ of iron ore every year, we are net exporters with volumes likely to reduce further as more Indian steel plants come up (again, surprisingly, right next to the iron ore mines in Orissa, Karnataka etc)
c) Coal imports are very likely to go up, and several new additions are planned to handle them, including the port mentioned earlier.

Net-net: we need more capacity, but almost surely not at the levels that PRC is already at. So we shall remain SDRE onree with no prospect in the short-to-medium term of matching 400-500mmtpa in a single port kind of setup. Moreover, proliferation of greenfield private ports means that no one will sit idly by when a single port starts growing that large. Competition has its benefits you know.

[wlin]

Agree, the stupid China government just build 50,000MW power plant in Shanxi and 35,000 MW in Inner Mongolia. In 2015, the power capacity in Shanxi will be 80,000MW in Shanxi and 70,000MW in Inner Mongolia (100,000MW will be wind power). That is still not enough. That maybe the reason why CCP appoint Li, Xiaopeng, Lipeng’s son, the former boss of Huaneng Power International to be the vice-governor of Shanxi. Again, go check the power capacity of any other country and see what those figure means.

I do not know why you draw the conclusion “The bulk of the power plants in China are hugely sub-scale and highly inefficient.”. Every year China will close 10,000MW old small power plant. Right now near 80% of China units are over 300MW. Any unit with below 600WM will not built in China. So I wonder what fact you are based on.

When you are talking about HVDC, at least you need to google first to see who is the current biggest player in the world.

OK, let me to give some explanations.

- China railways, especially in that region, is delivering coal, and at a scale many in this forum could hardly imagine. The railway around that region is among the most modern railways in the world.
- Even so it can not meet the needs of the fast increasing economy. So many people have to hire trucks to transport their coal, through the nation's vast expressway network.

Ok. So why didn't the ever so smart and all powerful CPC govt build the powerplants in the empty Mongolian steppes right on the coal seams and build HVDC lines of massive capacity to the east coast ?.

That is the best way to do it and not to build some 100000000 km of extra rail lines and transport 600M tons of coal to the coasts , to the powerplants and other infrastructure built on thickly populated lands on the east coast . To me all this railway building and hauling 600M tons and the consequent need for that is a massive waste of resources and a terrible and massive mis-allocation of capital and total waste of resources that cannot be stanched. It will be an open wound that will continue to bleed the Chinese long term.

Remember, in a typical diesel engine on a truck roughly 1/5 to a 1/4 the of the energy fuel burnt goes to the wheels, the rest is wasted!. And on top of that you take the coal and burn it in highly polluting , low thermal factor plants (33% efficiency) that are focused on lowering initial cost rather than the thermal efficiency (a clear consequence of subsidizing coal, it sets up such perverse economic incentives) . In a modern combined cycle coal plant, you achieve 50% to 60% thermodynamic efficiency so, even if you transmit it at just 80% efficiency and a good 20% loss over modern HVDC lines, you get far better overall system efficiency . Lets face it. The bulk of the power plants in China are hugely sub-scale and highly inefficient.

The problem with the CPC kind of "directed" development with little debate is that you can and will make monumental mistakes that are very difficult to correct. This is the flip side of "quick and efficient decision making". Think the Shanghai Maglev. It is a white elephant if there ever was one.

Though you may not realize it right now, I think China will regret the build out of those rail capacity and burning of 600MT of coal one day. No , not now when the going is good and it looks like you can fully sustain and afford it, but rather when there is tough times and the party stops. Think Dubai and it's massive credit financed investment bubble and what happened when the music stopped when a shock (financial crisis) hit.

[Sanjay M]

China's Wen says Japanese companies' wages too low

[Sanjay M]

Rising China Wages Cut Advantage Over Mexico, Flextronics Says

[vina]

Right on cue. A front page NYT Article.

China Fortifies State Businesses to Drive Growth

This is a great article. What it basically can explain is the harebrained schemes like mining and burning a BILLION and a half TONS of coal a YEAR , More steel than the entire world put together, more cement than the entire world, etc. etc.

Yes, basically it is the "commanding heights" (like the Chinese equivalent of the Indian PSUs running berserk) gone bonkers. China and India today are largely similar and are best characterized as MIXED economies. India was declared as one with a top heavy public sector, China was communist, but Deng Xioaping allowed private sector to get created in 1978. In India, the public sector driven growth strategy of all areas (including soaps) was a terrible under performance and we are still paying for the sins of those days in terms of poor roads, airports and other public goods.

The only issue I would argue with the above article is that I disagree that there are "two opinions" and a top down driven strategy can drive growth . The Indian AND Chinese experiences prove that it IS NOT the case.

Roll back to 1978. Deng's opening out in 1978 is the EXACT same as Rajiv Gandhi 1984 and Rao/Manmohan Singh in 1991. An open admission that the command and control path is a dead end. 1984- Rajiv Gandhi was just a partial admission and a way to find a via media with fiddling at the fringes. 1991 was a full fledged honest admission .

Shenzen was a result of 1978. The subsequent growth spurt in India is a result of 1984(IT-vity) and 1991(general broad based growth).

Now what China has done is that Shenzen tapped the true entrepreneurial skills, drive, business acumen and workethic of the Chinese people (they are one of the sharpest canniest traders and capitalistic people anywhere.. they are not Russians or Ukranians, but closer to Yindoos, Jews and Scots and Anglos in that respect) .

This is the bottomline. China's success from 1978 to 2007 was a SHENZEN model success. It was NOT a "HARBIN" success (old command economy directed smoke stack). What the CPC have done is to come back with a vengeance. To get back into the game, they have TAKEN the surplus of SHENZEN and opened the floodgates of Capital to the old "HARBIN" model. There has to be a political logic to it (stability, patronage politics, the usual stuff you saw in the 70s in India and I am sure in pre Deng China on a massive scale)

No secret which parts of the economy the "HARBIN" controls, yes.. ports,power, rail, airline.. the usual commie" commanding heights" garbage . There is massive growth coming out, because of the huge investment. No suprise when we see numbers like investments are over 50% of Chinese GDP.

The only problem is that it all sounds like a desperate Japanese style "Bridge to Nowhere" schemes on a massive scale to make sure that growth at all costs continue.

There is an eerie feeling of deja vu in this. The earlier command economy directed growth (the early years of the Indian 5 year plans gave fast growth, just like the Soviet ones and I am sure the early era of the Mao years), but they bit the dust subsequently.

Okay, even if the Chinese "learn" from that and say we will have a vibrant private sector side by side and not go the full "command" way, the "Public" sector will continue to suck blood out of the private sector.

Warnings and episodes of history abound. The Chinese even if they dont believe their OWN experiences just look across at South Korea can learn lessons. The "inevitability" of growth and the huge investment led strategy led to groups like Daweoo, Hyundai, Ssangyong etc. etc, biting the dust. Daewoo was making everything from TVs to chips to cars to everything and using the Cheabol model was running on steroids with cheap funds from the banking system. Where is Daewoo today and why ?. Hyundai just about managed to survive by the skin of it's teeth. Samsung wanted to make cars!. The rump of Ssangyong got sold to Mahindra& Mahindra recently (the Chinese govt run Geely could do nothing with Ssangyong, lets see what they do with Volvo).

China I think is making a monumental mistake. They are back to the "Chairman Mao says we should make more steel than the British and set numerical targets" . The "Great Leap Forward" killed some 20 to 30? millions and ended in tragedy and tears. This new "great leap" by feeding the "commanding heights" by bleeding SHENZEN is going to end in disappointment. There is no two ways about it. China is Daewoo multiplied 1000 times. That is all. The Chinese can sustain the game longer than the Koreans could (larger economy, larger population, more liquidity). The end will be the same however.

[Singha]

WSJ

In China, Western Firms Keep Secrets Close

By DANA MATTIOLI

Western companies are changing the way they do business in China, as they become more focused on protecting their intellectual property.

For years, part of the cost of entry to China in certain industries has been pairing up with a Chinese company to form a joint venture.

Often, that involves Western firms agreeing to a "technology transfer"—sharing their technology or intellectual property with a Chinese partner—in order to establish the joint venture.

Even when joint ventures aren't compulsory, some Western firms enter into them to gain access to local manufacturing capacity and contacts, and find they need to share technology as part of the deal.

But Western companies are increasingly expressing concerns about the safety of their intellectual property in such arrangements.

In July, Jürgen Hambrecht, chairman of chemical giant BASF AG and Peter Löscher, chief executive of industrial conglomerate Siemens AG reiterated foreign criticism in a meeting with China Premier Wen Jiabao about "technology transfer" rules, according to people present. The remarks echoed concerns by General Electric Co. CEO Jeff Immelt at a private dinner in Rome in June.

Also in July, Motorola Inc. sued Huawei Technologies Co. alleging that China's largest telecom-equipment company engaged in an elaborate plot to steal its trade secrets via a U.S.-based front company. Huawei has denied the claims.

These concerns are changing the China playbook for Western firms, counterbalancing the prospect of cheap manufacturing and a massive consumer market.

"They are definitely much more careful, and they are not just willy-nilly going and making partnerships in China," says Mark Gottfredson, a senior partner at Bain & Co. "From our advising clients perspective, the whole thing has changed. It's no longer about getting into China, it's about how you do China."

Some strategies that companies are adopting, and consultants are recommending: Not sharing the most sensitive intellectual property; sending more of their own employees to oversee manufacturing; partnering with a smaller firm that's less able to become a rival; and structuring joint ventures more carefully so that the Western firm has more control.

Consultants also recommend splitting up the manufacturing process. Bain partner Mr. Gottfredson worked with a Western appliance manufacturer that decided to make electric motors and electrical cords in China, but send all the components to a plant in Mexico to be assembled.

That way "nobody in there had all of the capabilities to actually make that refrigerator and start selling it," Mr. Gottfredson says.

More Western firms are also using technology safeguards. Rich Bergmann, global managing director of Accenture PLC's manufacturing practice, says U.S. firms are encrypting design plans and creating plans that "expire" and cannot be saved, forwarded or printed.

Users can't access encrypted files unless they have a special code. Another kind of file, called time bombs, live for a certain amount of time before disappearing. That helps limit and control who sees the information.

Setting up a joint venture so that the Western firm has its own employees in charge of running the plant, or at least in key roles managing the intellectual property is important, consultants say. That desire for more control is driving some Western firms to seek majority stakes in joint ventures, when possible.

Construction equipment manufacturer Terex Corp., for instance, has been establishing joint ventures in China since the 1990s, but Chief Executive Ron DeFeo says that he now prefers to strike deals that give him majority control. That's partly because he feels majority ownership provides better intellectual property protection.

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Credit: Bloomberg News

Light-emitting diodes are inspected under a microscope at a Cree facility in North Carolina earlier this year.
CHINAJV
CHINAJV

In May, the Westport, Conn., based company completed a joint venture with China's Fujian South Highway Machinery Co. where Terex is majority owner. Terex agreed to share its mobile rock-crushing and screening technology as part of the deal.

Mr. DeFeo declined to detail the specifics of the arrangement. But he notes that he will be able to tap the partner's knowledge of the local market.

Some firms are avoiding Chinese joint ventures entirely. Cree Inc., a Durham, N.C., based manufacturer of light-emitting diode lights and components, doesn't have any joint ventures in China, in part because of intellectual property concerns. John Kurtzweil, Cree's chief financial officer, says Cree wouldn't rule out entering into a joint venture, but would set a high bar for intellectual property protection.

For now, Cree has decided to manufacture LED wafers in the U.S., and ship them to be inserted into its products at a factory it owns in China.

"We don't want intellectual property outside the U.S. We want to control the intellectual property and keep it as close as possible," Mr. Kurtzweil says.

At least once within the past year, Cree executives decided against moving wafer-making outside the U.S. The firm might have saved money, but executives felt "the protection of our IP is more important than short-term cost savings," says Mr. Kurtzweil.

In addition, Cree owns its manufacturing site in China, rather than running it through a joint venture or with a partner. That's been the case since 2007, when Cree bought a Chinese company called COTCO Luminant Device Ltd., which had been one of Cree's chip customers. COTCO at the time had 1,300 employees and a manufacturing facility.

"We wanted to control the tech and distribution of the tech and control the IP associated with that," Mr. Kurtzweil says. "The best way to do that is with a team we knew for a number of years and be able to control the whole venture."

Write to Dana Mattioli at [email protected]

[vina]

Agree, the stupid China government just build 50,000MW power plant in Shanxi and 35,000 MW in Inner Mongolia. In 2015, the power capacity in Shanxi will be 80,000MW in Shanxi and 70,000MW in Inner Mongolia (100,000MW will be wind power). That is still not enough. That maybe the reason why CCP appoint Li, Xiaopeng, Lipeng’s son, the former boss of Huaneng Power International to be the vice-governor of Shanxi. Again, go check the power capacity of any other country and see what those figure means.

I do not know why you draw the conclusion “The bulk of the power plants in China are hugely sub-scale and highly inefficient.”. Every year China will close 10,000MW old small power plant. Right now near 80% of China units are over 300MW. Any unit with below 600WM will not built in China. So I wonder what fact you are based on.

You are missing the larger point of what I am trying to say. Bottom line is that China's FACTOR PRODUCTIVITY AND ICOR are abysmally low. Now to have the "magical" 8% or whatever random number the CPC decides, you are continuing to WASTE resources and build inefficiency on a massive scale, it is mind boggling. Just because you manage to build out that capacity to feed that waste , doesn't change it, and in fact boggles the imagination EVEN MORE. You cannot have a 10th of the per capita GDP while consuming nearly the same per capita in terms of energy,raw materials and bulk commodities as the richest countries in the world. There something fundamentally terribly wasteful or someone somewhere is lying and lying big time and most charitably, the MATH does NOT add up. This is NOT sustainable and I mean ECONOMICALLY and not just ECOLOGICALLY (to put your 100,000 MW in wind power in perspective, which I think is a brilliant idea) .

All said, I think the Northern China/ Mongolia coal business is a terrible disaster/waste. I think it fundamentally is probably because there are not too many 1000 MW upwards of thermal power being produced in one location in China,but rather distributed power plants of much smaller capacities spread around the country. That kind of thing will put massive stress on the branch and smaller lines away from the trunk lines

When you are talking about HVDC, at least you need to google first to see who is the current biggest player in the world.

Surely you don't mean that ABB and Siemens who are world leaders in this space are Chinese!. In fact the same ABB and Siemens do the exact same thing as they do in China in India as well (in fact India was earlier into this than the Chinese) and yes, ABB and Siemens design and manufacture in India a whole range of equipment including the bulk of their power equipment.

And okay, I googled and looked. Per this, the longest, biggest and baddest project being done right now is a 6000MW, 800KV , 1850KM project being done (800KV is the latest and greatest there is) and no, that is not in China, but in India !. Altogether around 45,000 MW excess power is going to come on tap in the eastern part of India that is going to get wheeled out and sold in the other parts , so you can see more such extra long cutting edge lines (in addition to the ones already there) , coming up in as those capacities come on stream.

But all the same, I am flummoxed. Most of the HVDC lines in China seem to be from the three Gorges to Shanghai, Guangdong (basically east and south). The Chinese dont have any HVDC lines built from large thermal stations to anywhere .

That is why I believe that Chinese thermal plants are spread out/sub scale and because of lack of scale will be technologically inefficient and wasteful in terms of overall efficiency. The lack of scale makes that kind of transmission useless and they most probably service local grids. In fact, I would put the overwhelming bulk of china's power to be of this variety of plants.

The flip side of that is that it is extremely demanding on supply chains (especially on the secondary lines and lower capacity lines, surely even the Chinese cannot build dedicated freight lines to every power plant spread around the country!) and that is probably the reason you see coal being trucked around everywhere. The way out would be to close all those local operated thermal power units , put up large ultra mega thermal units (around 3000MW each) on the pit heads and wheel the power to consumption centers.

As for coal being used for household heating,surely 21st century China is not going to be like 18th century Europe!. Why they had coal gas in Europe in the 19th century!. What you need to do is buy natural gas from the Russians (Putin inaugarated a pipeline yesterday I think) , set up coal gassification units, and lay pipeline grid to places like Harbin and other provinces near the Russian border (and basically places north of YangTse river) . That is good for the environment, health , and you wont have to build those roads and rail and even mine that coal and the air in Beijing will clean up miraculously!

Unfortunately maybe because of the hold of civil engineers in the Chinese Central Govt's higher ranks supereme positions, China has become infatuated with large scale, giant , gargantuan , large risk engineering solutions, whether they are appropriate or not.

Indeed, for a person with a hammer, every problem seems to be a nail!

[wlin]

I do not try to compare with India. I present the number only to explain the background. If those two provinces produces 140Ｍ tons of coal and got into this situation is one thing, producing 1.4B tons (The second coal producer US produces about 1B tons) and got into this is another thing.

It is hard to explain why it happened. Let me explain it this way. For example, when you drive to LA for SF, you got three roads: interstate 5, highway 101 and US1. Let’s assume you need to transfer 10M tons from SF to LA. That is 3000 trucks per day. I remember interstate 5 got a big slope entering LA. So that slope will cause a lot of accidents if heavy trucks passing by. So let us assume the authority close the interstate 5 to these coal trucks. (The major highway link Shanxi and Beijing closed to trucks for the same reason. It is near BadaLing, the famous Great Wall site. If you have been there, you would remember the slope. There is no way the coal truck can stop if something happened. So to avoid accidents, the highway closed to all trucks. ).

Then let us assume all trucks went to highway 101. And because of years of usage, the road got damaged. Then the authority decided to maintain the highway 101 and resurface the highway. To do it quick, they will close the entire highway and spend one month to resurface the whole highway. (Again, I don’t mean US do it. But that is the case in Beijing, the major highway transported coal has been closed to resurface the whole 300 km highway. It started from middle August and completed by middle September ).

If this happened, what will all these trucks do? They will go to US1 to route to LA and since every truck needs to pass the weigh station, then you got a huge traffic jam which became the latest evidence of US collapse. (Sorry, it should be China collapse).

BTW: I agree the India may not even need the same capacity of China. I believe other people in the world would think the same way.

The size matters. China already built a lot power plant at ports. Maybe 300,000MW or more. A lot of coal from Shanxi and Inner Mongolia will be transport to ports in Hebei and then transport to South China. The Daqin capacity is 400M ton per year and link Shanxi and Qinhuandao port which is the largest port in the world with capacity 200M tons. Compare it to the port your are talking about. You won’t know the real meaning of it without compare.

wlin, I am not trying to compare Daqin or Qinhuando with any port in India. Try to read my post again if you did not get it. I do realize and acknowledge that infra is something that PRC is pretty good at. If you did not get that, let me help you with it:

Wonder why the PRC wunderkids (whose specialty seems to be top-notch infra!!) overlooked this simple aspect that even boor SDREs can see. As vina saar alludes to above, it must be the unhealthy level of subsidies - else the total logistics cost and time taken by the cargo to reach factory doorstep would make truck/road transport options downright unviable given the massive volumes (600mmtpa+!!) involved.

See - the point is not how much capacity your ports have. The point is the uncontrolled proliferation of massive coal consuming plants in the interior in places that are faraway from sources of coal - be it domestic coal mines or ports that bring in the imported coal AND the reason for such misallocations of capital.

If I am not mistaken, this was vina's intention too. Nobody here is dumb enough to compare India's port infra or the volumes handled at Indian ports to that of PRC and claim that India is ahead.

OT alert:
Heck, India may not even need the kind of ports capacity that China has considering
a) We are less export oriented (relatively) - lot less containers need to sail in and out of our ports
b) China imports 400mmtpa+ of iron ore every year, we are net exporters with volumes likely to reduce further as more Indian steel plants come up (again, surprisingly, right next to the iron ore mines in Orissa, Karnataka etc)
c) Coal imports are very likely to go up, and several new additions are planned to handle them, including the port mentioned earlier.

Net-net: we need more capacity, but almost surely not at the levels that PRC is already at. So we shall remain SDRE onree with no prospect in the short-to-medium term of matching 400-500mmtpa in a single port kind of setup. Moreover, proliferation of greenfield private ports means that no one will sit idly by when a single port starts growing that large. Competition has its benefits you know.

[wlin]

I just wonder why everybody are talking about Shenzhen. When you talk about China’s economy, the Yangzi delta has always been at the top for the past millennium and will for the next. I do not know why you pick Harbin. But my wife will like it, she is from Harbin.

Harbin is famous for its heavy industry like aerospace, equipment manufacturing etc. I believed Harbin export quite some power devices to India. I can understand your point. For Chinese, we view the ability as the most important. I believe India imported quite some power generation devices from Harbin. So we do not view Shenzhen as that high because it is major for exporting economy. We view Harbin pretty high, because her industry is really the highest ladder of industry. If Harbin can have the best industry in the world someday, that is the day China truly stands up. I can honestly say almost every Chinese shared my view. No matter what outside world say, we will stick to that and this view has never changed.

BTW: If we can become South Korea, that means China is twice of US economically. It is really not so bad to me.

Right on cue. A front page NYT Article.

China Fortifies State Businesses to Drive Growth

This is a great article. What it basically can explain is the harebrained schemes like mining and burning a BILLION and a half TONS of coal a YEAR , More steel than the entire world put together, more cement than the entire world, etc. etc.

Yes, basically it is the "commanding heights" (like the Chinese equivalent of the Indian PSUs running berserk) gone bonkers. China and India today are largely similar and are best characterized as MIXED economies. India was declared as one with a top heavy public sector, China was communist, but Deng Xioaping allowed private sector to get created in 1978. In India, the public sector driven growth strategy of all areas (including soaps) was a terrible under performance and we are still paying for the sins of those days in terms of poor roads, airports and other public goods.

The only issue I would argue with the above article is that I disagree that there are "two opinions" and a top down driven strategy can drive growth . The Indian AND Chinese experiences prove that it IS NOT the case.

Roll back to 1978. Deng's opening out in 1978 is the EXACT same as Rajiv Gandhi 1984 and Rao/Manmohan Singh in 1991. An open admission that the command and control path is a dead end. 1984- Rajiv Gandhi was just a partial admission and a way to find a via media with fiddling at the fringes. 1991 was a full fledged honest admission .

Shenzen was a result of 1978. The subsequent growth spurt in India is a result of 1984(IT-vity) and 1991(general broad based growth).

Now what China has done is that Shenzen tapped the true entrepreneurial skills, drive, business acumen and workethic of the Chinese people (they are one of the sharpest canniest traders and capitalistic people anywhere.. they are not Russians or Ukranians, but closer to Yindoos, Jews and Scots and Anglos in that respect) .

This is the bottomline. China's success from 1978 to 2007 was a SHENZEN model success. It was NOT a "HARBIN" success (old command economy directed smoke stack). What the CPC have done is to come back with a vengeance. To get back into the game, they have TAKEN the surplus of SHENZEN and opened the floodgates of Capital to the old "HARBIN" model. There has to be a political logic to it (stability, patronage politics, the usual stuff you saw in the 70s in India and I am sure in pre Deng China on a massive scale)

No secret which parts of the economy the "HARBIN" controls, yes.. ports,power, rail, airline.. the usual commie" commanding heights" garbage . There is massive growth coming out, because of the huge investment. No suprise when we see numbers like investments are over 50% of Chinese GDP.

The only problem is that it all sounds like a desperate Japanese style "Bridge to Nowhere" schemes on a massive scale to make sure that growth at all costs continue.

There is an eerie feeling of deja vu in this. The earlier command economy directed growth (the early years of the Indian 5 year plans gave fast growth, just like the Soviet ones and I am sure the early era of the Mao years), but they bit the dust subsequently.

Okay, even if the Chinese "learn" from that and say we will have a vibrant private sector side by side and not go the full "command" way, the "Public" sector will continue to suck blood out of the private sector.

Warnings and episodes of history abound. The Chinese even if they dont believe their OWN experiences just look across at South Korea can learn lessons. The "inevitability" of growth and the huge investment led strategy led to groups like Daweoo, Hyundai, Ssangyong etc. etc, biting the dust. Daewoo was making everything from TVs to chips to cars to everything and using the Cheabol model was running on steroids with cheap funds from the banking system. Where is Daewoo today and why ?. Hyundai just about managed to survive by the skin of it's teeth. Samsung wanted to make cars!. The rump of Ssangyong got sold to Mahindra& Mahindra recently (the Chinese govt run Geely could do nothing with Ssangyong, lets see what they do with Volvo).

China I think is making a monumental mistake. They are back to the "Chairman Mao says we should make more steel than the British and set numerical targets" . The "Great Leap Forward" killed some 20 to 30? millions and ended in tragedy and tears. This new "great leap" by feeding the "commanding heights" by bleeding SHENZEN is going to end in disappointment. There is no two ways about it. China is Daewoo multiplied 1000 times. That is all. The Chinese can sustain the game longer than the Koreans could (larger economy, larger population, more liquidity). The end will be the same however.

[wlin]

I think there is one fundamental difference in thinking what is economy for. You will calculate this and that. We think about the real thing. We focus more on what people can get. You may think the infrastructure is waste money. We think it is essential to rising living standard.

When you talk the steel, you think half of the world output is way too high. But if compare per capita, US and Japan is still ahead of us, maybe not for US, I did not do the calculation. Especially if you consider history wise, they have already built their infrastructure using steel and cement. Well, a great infrastructure does not mean you are a developed country, but no developed country does not have great infrastructure. A great infrastructure does not mean your people will have a decent life, but no people will have a decent life without great infrastructure. China infrastructure is far far away from great for a country with 1.3 billion people. You think it is a waste, but in many Chinese eyes, that is real economy.

I still remember your prediction about how hard will China get hit by this recession because China is exported oriented economy bla bla. At that time, I told you China economy has been always based on domestic demand. It seems you kind of accept that view now. So it is good progress.

Chinese view for infrastructure is it is essential to raise living standard. The infrastructure includes energy, communication, education, health care, transportation etc. Every penny for the infrastructure will be financed domestically. The infrastructure will be built by Chinese labors. All the equipment and devices will come from domestically. I mean this is a goal. For example, we planed to build high speed rail in the early 90s but wait until recently when we can get all the know how to build it. During this process, your industry also climbed the ladder and become the real competitor. The real backbone of our economy is those equipment builders. To build tele-comm infra, we got Huawei. To build power stations, we got many medium size power equipment companies. To build highways, we got a lot of build equipments companies and a lot of big contractors. If we only buy those equipments from Caterpillar, that will bankrupt us. In this process, steel producers, machinery industry etc are make their first bulk profit. If you familiar with Chinese stock market, you will know hundreds of small middle companies names. And they will come to international stage someday, some of them will become famous. You can continue your joy to ridiculing this, we will continue to do it.

About HVDC, again, I am talking about the complete projects that already done. Three Gorges is the previously largest one. Three Gorges does not trans to Guangdong. It is from Guizhou to Guangdong, the current capacity is 17000MW. About one quarter of Guandong’s power comes from Guizhou now.

I agreed the 800KV is the latest one. The first 800KV project in the world is completed in 2009, which transfer from Yunnan to Guangdong. It is 1418 km long, 800KV, 5000MV.
http://www.zdxw.com.cn/ttxw/201006/t20100621_319302.htm

The current biggest one is Xiangjiaba-Shanhai, it is 1907KM, 800KV, 6400MV. It complete on July 8th.
http://www.gov.cn/jrzg/2010-07/08/content_1648978.htm.


China can now produce all 500KV related devices and they claimed they can produce all 800KV devices right now. You can see from my link. The Chinese model is like this, they will build first or two pilot project to verify the technology and if they can master all the technology then they will build it like producing mushroom. Your wiki link probably maintained by ABB and Siemens guys. So if one project purchased some devices from them then they claimed themselves supplier. It is not wrong. For example, the $3B Yunnan 800KV project, Siemens got 300M Euro. ABB got $400M from $5B Xiangjiaba project.

To my surprise, these two project in fact are in your wiki (Normally their data is very poor related to China because very few Chinese will bother to go there to update). The difference is Yunnan project completed in 2009 not 2010. But it still outdates, for example currently there three 800KV project being built in Schuan. Sicuan Jinping-Jiangsu Suzhou will completed next year. It is 800KV 2095KM, 7200MW. Normally when we say it will completed, it will.

Agree, the stupid China government just build 50,000MW power plant in Shanxi and 35,000 MW in Inner Mongolia. In 2015, the power capacity in Shanxi will be 80,000MW in Shanxi and 70,000MW in Inner Mongolia (100,000MW will be wind power). That is still not enough. That maybe the reason why CCP appoint Li, Xiaopeng, Lipeng’s son, the former boss of Huaneng Power International to be the vice-governor of Shanxi. Again, go check the power capacity of any other country and see what those figure means.

I do not know why you draw the conclusion “The bulk of the power plants in China are hugely sub-scale and highly inefficient.”. Every year China will close 10,000MW old small power plant. Right now near 80% of China units are over 300MW. Any unit with below 600WM will not built in China. So I wonder what fact you are based on.

You are missing the larger point of what I am trying to say. Bottom line is that China's FACTOR PRODUCTIVITY AND ICOR are abysmally low. Now to have the "magical" 8% or whatever random number the CPC decides, you are continuing to WASTE resources and build inefficiency on a massive scale, it is mind boggling. Just because you manage to build out that capacity to feed that waste , doesn't change it, and in fact boggles the imagination EVEN MORE. You cannot have a 10th of the per capita GDP while consuming nearly the same per capita in terms of energy,raw materials and bulk commodities as the richest countries in the world. There something fundamentally terribly wasteful or someone somewhere is lying and lying big time and most charitably, the MATH does NOT add up. This is NOT sustainable and I mean ECONOMICALLY and not just ECOLOGICALLY (to put your 100,000 MW in wind power in perspective, which I think is a brilliant idea) .

All said, I think the Northern China/ Mongolia coal business is a terrible disaster/waste. I think it fundamentally is probably because there are not too many 1000 MW upwards of thermal power being produced in one location in China,but rather distributed power plants of much smaller capacities spread around the country. That kind of thing will put massive stress on the branch and smaller lines away from the trunk lines

When you are talking about HVDC, at least you need to google first to see who is the current biggest player in the world.

Surely you don't mean that ABB and Siemens who are world leaders in this space are Chinese!. In fact the same ABB and Siemens do the exact same thing as they do in China in India as well (in fact India was earlier into this than the Chinese) and yes, ABB and Siemens design and manufacture in India a whole range of equipment including the bulk of their power equipment.

And okay, I googled and looked. Per this, the longest, biggest and baddest project being done right now is a 6000MW, 800KV , 1850KM project being done (800KV is the latest and greatest there is) and no, that is not in China, but in India !. Altogether around 45,000 MW excess power is going to come on tap in the eastern part of India that is going to get wheeled out and sold in the other parts , so you can see more such extra long cutting edge lines (in addition to the ones already there) , coming up in as those capacities come on stream.

But all the same, I am flummoxed. Most of the HVDC lines in China seem to be from the three Gorges to Shanghai, Guangdong (basically east and south). The Chinese dont have any HVDC lines built from large thermal stations to anywhere .

That is why I believe that Chinese thermal plants are spread out/sub scale and because of lack of scale will be technologically inefficient and wasteful in terms of overall efficiency. The lack of scale makes that kind of transmission useless and they most probably service local grids. In fact, I would put the overwhelming bulk of china's power to be of this variety of plants.

The flip side of that is that it is extremely demanding on supply chains (especially on the secondary lines and lower capacity lines, surely even the Chinese cannot build dedicated freight lines to every power plant spread around the country!) and that is probably the reason you see coal being trucked around everywhere. The way out would be to close all those local operated thermal power units , put up large ultra mega thermal units (around 3000MW each) on the pit heads and wheel the power to consumption centers.

As for coal being used for household heating,surely 21st century China is not going to be like 18th century Europe!. Why they had coal gas in Europe in the 19th century!. What you need to do is buy natural gas from the Russians (Putin inaugarated a pipeline yesterday I think) , set up coal gassification units, and lay pipeline grid to places like Harbin and other provinces near the Russian border (and basically places north of YangTse river) . That is good for the environment, health , and you wont have to build those roads and rail and even mine that coal and the air in Beijing will clean up miraculously!

Unfortunately maybe because of the hold of civil engineers in the Chinese Central Govt's higher ranks supereme positions, China has become infatuated with large scale, giant , gargantuan , large risk engineering solutions, whether they are appropriate or not.

Indeed, for a person with a hammer, every problem seems to be a nail!

[derkonig]

Head of People's Bank of China may have defected. So are the rats deserting the sinking ship?
http://www.businessinsider.com/zhou-xia ... ted-2010-8

[Suraj]

Head of People's Bank of China may have defected. So are the rats deserting the sinking ship?
http://www.businessinsider.com/zhou-xia ... ted-2010-8

The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou.

$430 billion loss ?? Seriously ?

[derkonig]

It is unlikely that the loss would be that steep, it could be the notional that was bet upon (like mentioned in the comments), so the losses would be a lot lesser. A $430b wipeout will send shock waves around the world.

[wlin]

You guys really believe this kind of crap.
This comes first from one of the most trusted site Falungong site. One of its relaible news is serveral hundreds millions CCP members withdraw their membership.

Head of People's Bank of China may have defected. So are the rats deserting the sinking ship?

• http://www.businessinsider.com/zhou-xiaochua-defected-2010-8

[Yayavar]

You guys really believe this kind of crap.
This comes first from one of the most trusted site Falungong site. One of its relaible news is serveral hundreds millions CCP members withdraw their membership.

Head of People's Bank of China may have defected. So are the rats deserting the sinking ship?

• http://www.businessinsider.com/zhou-xiaochua-defected-2010-8

defection being a rumour or not...is the loss real?

[ramana]

Well here is Forbes reporting the same:

LINK

Sourced from STRATFOR!

[paramu]

There is an old saying "Difference between Russians and Americans is that Russians know that what their government says is propaganda whereas Americans don't". Looks like Chinese are like Americans.

[vina]

Harbin is famous for its heavy industry like aerospace, equipment manufacturing etc. I believed Harbin export quite some power devices to India. I can understand your point. For Chinese, we view the ability as the most important. I believe India imported quite some power generation devices from Harbin. So we do not view Shenzhen as that high because it is major for exporting economy. We view Harbin pretty high, because her industry is really the highest ladder of industry. If Harbin can have the best industry in the world someday, that is the day China truly stands up.

I picked Harbin on purpose because it was the focus of the planned/communist economy with the highest legacy of the Mao era industry.

Sorry, I think you have it fundamentally wrong. HARBIN (in the broader metaphorical sense) is what brought China to it's knees before 1978. After that if China is standing up today, it is because of SHENZEN (in the broader sense) . Now the recent exports of HARBIN is because of Shenzen because that is the only way you can finance the dirt cheap cut price rates at which you could export boilers and power plant auxiliaries and other industrial exports. Those were bought not for engineering excellence or performance, but for the "China Price" and the fact that many of those exports were in blatant violation of the technology license from the global majors that were sourced from in the first place .

That is what I meant, Shenzen's surplus being directed to Harbin. Mark my words, Harbin will bring you to your knees again if something happens to Shenzen (economic shock, barriers from trading partners, China forced to revalue currency like Japan did in late 80s and we know what happened to Japan after that).

[Sanjay M]

Everybody's repeating the rumour, which seems to originate from Stratfor:

http://blogs.forbes.com/china/2010/08/3 ... -defected/

http://www.zerohedge.com/article/rumor- ... n-ust-rela

[vina]

I think there is one fundamental difference in thinking what is economy for. You will calculate this and that. We think about the real thing. We focus more on what people can get. You may think the infrastructure is waste money. We think it is essential to rising living standard.

Infrastructure if useful and has economic returns is absolutely necessary. If it is a "bridge to nowhere" like in Japan and increasingly in China, it is a sheer and total waste. You are better off giving the money away as cash to the people to spend, atleast domestic demand will go up.

When you talk the steel, you think half of the world output is way too high. But if compare per capita, US and Japan is still ahead of us,

Dude! Again their per capita incomes are TEN times higher!. So something fundamentally wrong when you compare cement, steel, electricity , aluminium copper and what have you at the same rates. What it means is that for similar inputs you have just a TENTH of the output! That is all!

I still remember your prediction about how hard will China get hit by this recession because China is exported oriented economy bla bla. At that time, I told you China economy has been always based on domestic demand. It seems you kind of accept that view now. So it is good progress.

Huh ?. What has happened with Chinese domestic demand that shows that it is now biggest component of GDP and not investment ?. The domestic demand you see is the "HARBIN" kind of demand that is simply not sustainable, even for maybe one to two more years. China placed all it's bets on the US recovering so that it can continue old export driven path again. But no, things have changed irreversibly. There will be huge pressure to increase exchange rates and you can see import barriers go up to Shenzen if the old path is continued. Harbin cannot and will not substitute for real Chinese end user household demand.

That is exactly the point. What will you do with all the huge capacity you have built in steel, aluminium and everything and the 1.4b tons of coal you mine if HARBIN is not fed. It is a giant that needs to be fed at all costs. Or the the economy contracts. Jim Chanos is right. China is on a treadmill to hell. If it gets off, Harbin collapses and the economy takes big hits.

All the equipment and devices will come from domestically. I mean this is a goal.

Right.. So why will the rest of the world buy from China then ?. They too can say the exact same thing and if that happens, Shenzen goes bust and with that China goes down the drain and it is back to 1978 and begging for US Dollars and hoping an Iran-Iraq war breaks out again so that you can sell weapons for USD to people to whom no one else will sell weapons.

For example, we planed to build high speed rail in the early 90s but wait until recently when we can get all the know how to build it. During this process, your industry also climbed the ladder and become the real competitor. The real backbone of our economy is those equipment builders. To build tele-comm infra, we got Huawei. To build power stations, we got many medium size power equipment companies. To build highways, we got a lot of build equipments companies and a lot of big contractors. If we only buy those equipments from Caterpillar, that will bankrupt us

Don't kid yourself. The labor is Chinese. But the bulk of the equipment is imported either directly or built in China to foreign specs. China's growth is backed by massive technology and equipment imports . The only kind of machinery and machine tools that are of domestic origin are the kinds that you ship out to Pakistan , like the railway engines that were sent with great fan fare

In this process, steel producers, machinery industry etc are make their first bulk profit.

Chinese steel and machinery makers making profit! How and when ?. Global steel industry is in deep trouble with massive excess capacity and many steel mills being mothballed. It No country has more excess capacity than China and your steel mills are making profits (or atleast between 2008 and recently?) ? Unbelievable!.

China can now produce all 500KV related devices and they claimed they can produce all 800KV devices right now. You can see from my link. The Chinese model is like this, they will build first or two pilot project to verify the technology and if they can master all the technology then they will build it like producing mushroom.

err. That kind of intellectual property theft is the exact reason why NO ONE trusts the Chinese. But the fact is those kind of industrial equipment has no market if you make it like "mushrooms" and much of that equipment will have to be custom designed for that specific application! At best you will copy one design and hope and pray that what you copied is the closest to the vast majority of the possible applications and it roughly fits.

[vina]

$430 billion loss ?? Seriously ?

$ 430,000,000,000 ? . All gone pooof?.
Gosh that is close to a QUARTER of their $2T rumored reserves which is used to backstop every excess in the Chinese economy.

Atleast now do you agree with me that the Sovereign Funds that you were so gung ho about and I was so vehemently against is a terrible idea.

I had told in this forum that they will ALL lose their shirts. All of the did. Singapore, Dubai, Soddies, Kuwaitis, and now the Chinese. Thank goodness that Indians had the better sense to not trust their Babus (Baboons?) to play roulette with the hard earned reserves.

[Sanjay M]

Sovereign wealth funds mean more lemmings can band together to charge off that cliff

[Suraj]

Atleast now do you agree with me that the Sovereign Funds that you were so gung ho about and I was so vehemently against is a terrible idea.

vina: You're building a strawman

[zlin]

For power generation
1) China has far more pit-head coal-fired power stations than India, or any countries in this world.
2) China has lots more large coal-fired power stations (over 1000MW) than India, or any countries in this world. Several pit-head stations are among world largest power station, like Tuoketuo power station in Inner Mongolia has 8x600MW (4800MW) in operation and Zouxian power station in Shandong province has 4540MW (4x335MW, 2x600MW, 2x1000MW) in operation. I cannot list all Chinese coal-fired power stations over 1000MW here, because probably there are over a hundred in operation already. It's already not a big deal to have a power station over 1000MW in China.
3) China slowed down its building rate of coal-fired power stations since global warming became a great issue, and put much more effort to build clean power stations as hydroelectric, nuclear power, wind-power and solar power, in a mind-blowing rate for any countries in this world.
4) China has mastered far more technology and capability in building large generation unit, so-call supercritical pressure and ultra supercritical pressure generator/boiler, than India. China can design and manufacture 600MW level generator unit all by her own and exporting to other countries, India can't yet. China has already installed and is installing dozen of 1000MW generator units, India has NONE. India is buying 600MW units from China, which created debate whether China should sell them to India now under much cheaper price than western countries.

For power transmission
5) China has more and earlier HVDC (200-800kV) lines than India, and has far more construction than India, or any countries in this world.
6) China has only operational UHVDC (>800kV) or UHVAC(>1000kV) transmission lines in this world, all other countries, including India, only have plans or under construction now. Indian first 800kV UHVDC Biswanath - Agra line, like all other India big infrastructure projects, is under slow pace and delay. It's still in bidding process now and no solid construction has been done yet. It normally takes 5-6 years to complete such project and in India, who knows.
http://www.electricalmonitor.com/T&D/bh ... ns-project

China has far more UHVDC and UHVAC constructions and plans now than any countries in this world

[vina]

China has mastered far more technology and capability in building large generation unit, so-call supercritical pressure and ultra supercritical pressure generator/boiler, than India. China can design and manufacture 600MW level generator unit all by her own and exporting to other countries, India can't yet

.

Lets see. Specifically the supercritical boilers that you mention (including the DongFeng 600MW ones that were exported to India). Here are the companies in China and their licensees.

• 1. Harbin Power Engineering Company -- > Ultra super critical boiler - Mitsubishi License
  2. Dongfang Boiler --> BHK/Hitachi licensee
  3. Shanghai Boiler & Wuhan Boiler --> Alstom License

Most of the Korean equipment vendors too have a Siemens/Alstom/Mitsubishi/Hitachi license including Doosan.

There is nothing particularly great in terms of engg that the Chinese have done and invented here. What they did was get the license and made it in bulk for the local market and in some notable cases EXPORTED in violation of license terms to foreign markets (like India for instance) , with their main strategy being unlimited and ultra cheap suppliers credit and fully leveraged the fixed peg to the USD to outcompete the Japanese and Europeans who had adverse exchange rates (Koreans did the same too, Korean Won has a very favorable exchange rate leading to a great help in exports).

Now when the Indian guys like L&T and others tied up with the Siemens and Hitachi and others and are about to start making that equipment, you now have the 21% import duty on Chinese equipment that has come in. Mind you, that does not happen without deep thought, after all, equipment costs do go up if you impose import duties , but then Chinese don't pay license fees and manipulate exchange rates.

[wlin]

It depends on how much you value the truth. SAFE is probably the most conservative foreign reserve authority in the world.

You guys really believe this kind of crap.
This comes first from one of the most trusted site Falungong site. One of its relaible news is serveral hundreds millions CCP members withdraw their membership.

defection being a rumour or not...is the loss real?

[wlin]

Sir，you really know nothing about China economy no matter how hard you pretend to be. “Shenzen's surplus being directed to Harbin” Any Chinese mainlander will laugh at this statement.

Harbin is famous for its heavy industry like aerospace, equipment manufacturing etc. I believed Harbin export quite some power devices to India. I can understand your point. For Chinese, we view the ability as the most important. I believe India imported quite some power generation devices from Harbin. So we do not view Shenzhen as that high because it is major for exporting economy. We view Harbin pretty high, because her industry is really the highest ladder of industry. If Harbin can have the best industry in the world someday, that is the day China truly stands up.

I picked Harbin on purpose because it was the focus of the planned/communist economy with the highest legacy of the Mao era industry.

Sorry, I think you have it fundamentally wrong. HARBIN (in the broader metaphorical sense) is what brought China to it's knees before 1978. After that if China is standing up today, it is because of SHENZEN (in the broader sense) . Now the recent exports of HARBIN is because of Shenzen because that is the only way you can finance the dirt cheap cut price rates at which you could export boilers and power plant auxiliaries and other industrial exports. Those were bought not for engineering excellence or performance, but for the "China Price" and the fact that many of those exports were in blatant violation of the technology license from the global majors that were sourced from in the first place .

That is what I meant, Shenzen's surplus being directed to Harbin. Mark my words, Harbin will bring you to your knees again if something happens to Shenzen (economic shock, barriers from trading partners, China forced to revalue currency like Japan did in late 80s and we know what happened to Japan after that).

[wlin]

Stratfor only copied from Chinese site. The first link said it is from Ming Pao which Ming Pao denies any link with that. It proably a post on the Ming pao forum or blog something like that. The original one is from Falungong site which provided creditable Chinese news every day.
Zhou may need to appear in public in the coming days. Probably charity event for flooding etc. Anyway I really hope this news is true because he should go long time back.
The West media really have no Chinese news source so they just go from this blog to that blog and people really believe the trash they got.

Everybody's repeating the rumour, which seems to originate from Stratfor:

http://blogs.forbes.com/china/2010/08/3 ... -defected/

http://www.zerohedge.com/article/rumor- ... n-ust-rela

[derkonig]

The Falun Gong anyday has more credibility in front of the world than xinhua & the commie thugs of the PRC. The whole world knows how PRC lies & fudges their economic statistics.

[wlin]

Infrastructure if useful and has economic returns is absolutely necessary. If it is a "bridge to nowhere" like in Japan and increasingly in China, it is a sheer and total waste. You are better off giving the money away as cash to the people to spend, atleast domestic demand will go up.

I do not think we have that lurxury to build "bridge to nowhere" right now. Japan is too small and too developed.

Dude! Again their per capita incomes are TEN times higher!. So something fundamentally wrong when you compare cement, steel, electricity , aluminium copper and what have you at the same rates. What it means is that for similar inputs you have just a TENTH of the output! That is all!

Hey, Genius, I am talking about living standard not per capita GDP. I had chance to buy one 5-dollar-no-refill-medium-size-cup coke in Tokyo. The price tag there is also many times. About living standard, that means food, housing, education, transportion, power, communication, entainment etc. I do not see any country in this world can claim they have a 10 times living standard on average compare to China.

About per capita incomes, it is 10 times in dollar terms. It was 30, 40, 50 times before. I hope it will become 3, 4, 5 times in the future.

Huh ?. What has happened with Chinese domestic demand that shows that it is now biggest component of GDP and not investment ?. The domestic demand you see is the "HARBIN" kind of demand that is simply not sustainable, even for maybe one to two more years. China placed all it's bets on the US recovering so that it can continue old export driven path again. But no, things have changed irreversibly. There will be huge pressure to increase exchange rates and you can see import barriers go up to Shenzen if the old path is continued. Harbin cannot and will not substitute for real Chinese end user household demand.

That is exactly the point. What will you do with all the huge capacity you have built in steel, aluminium and everything and the 1.4b tons of coal you mine if HARBIN is not fed. It is a giant that needs to be fed at all costs. Or the the economy contracts. Jim Chanos is right. China is on a treadmill to hell. If it gets off, Harbin collapses and the economy takes big hits.

China did a lousy job in national accounts field. But if you really have interest, it is not difficult to know China is the number one automobile market right now. More than US, Japan, or Germany combined. Besides that you can name any market to see the size of it. It is not on statistical report does not mean they do not exist.

About exchange rate, I talked before, I want a strong Yuan. That is why I really hope the rumor is real. Wen and Zhou need to be kicked out long time ago.

BTW JFYI: Based on the experience of my business and all people I knew, the export order is very strong here right now and the pricing power has never been better. I guess the reason is this recession really killed a lot small players. We Chinese really like recession because nothing like recession can help you to eliminate your competitors.

One correction, the coal production in China is not 1.4B but 3B ton. Do not worry about us, we still a poor developing country. There are still 700 million people living in rural area and needs to be urbanized. There are too many things need to be done here. At the peak time of British and US, they all had a long period of time to produce over half of world steel. Indians have done a great job in talk the India passing China talk. But if you want to really to walk the walk, you need to do the exactly same thing. Do not tell me you guys do not know that.

All the equipment and devices will come from domestically. I mean this is a goal.
Right.. So why will the rest of the world buy from China then ?. They too can say the exact same thing and if that happens, Shenzen goes bust and with that China goes down the drain and it is back to 1978 and begging for US Dollars and hoping an Iran-Iraq war breaks out again so that you can sell weapons for USD to people to whom no one else will sell weapons.

It not about if you want it or not, it is about if you really can do it or not. Again why you make so much noise about Shenzhen? I cannot understand. It is economy is only 1% of Chinese economy. Are you talking about the Shenzhen in China? Let us stop to talk about begging US dollars etc, ok? The record will not be kind to you.

Don't kid yourself. The labor is Chinese. But the bulk of the equipment is imported either directly or built in China to foreign specs. China's growth is backed by massive technology and equipment imports . The only kind of machinery and machine tools that are of domestic origin are the kinds that you ship out to Pakistan , like the railway engines that were sent with great fan fare

Calm down. Sir. We also sell some engines to India.

Chinese steel and machinery makers making profit! How and when ?. Global steel industry is in deep trouble with massive excess capacity and many steel mills being mothballed. It No country has more excess capacity than China and your steel mills are making profits (or atleast between 2008 and recently?) ? Unbelievable!.

You'd better believe it. Bao stell got a profit 11B RMB on 98B sales for the first 6 month. You can name any other company and i can tell you the number.

That kind of intellectual property theft is the exact reason why NO ONE trusts the Chinese. But the fact is those kind of industrial equipment has no market if you make it like "mushrooms" and much of that equipment will have to be custom designed for that specific application! At best you will copy one design and hope and pray that what you copied is the closest to the vast majority of the possible applications and it roughly fits.

There is one term called technology transfer. Do not tell me India award your projects without asking for that. The difference is if you can learn what you got and manufacture it without further help or even develop new models on top of it.
You keep talking about Shanghai Meglev project. You must think we Chinese are a bunch of idiots to pay that price without technology transfer. Do not worry about the mushrooms, we have a vast domestic market. There will be a lot of 800KV projects in the coming year. If we got it done in China. Then we can sell it to Asia, Africa, South America etc. It will take several decades to do it and I really do not think we need to worry about the business in 2030 or 2350. Think too much will hurt your health.

[wlin]

I totally agree with you on this. The Falun Gong site is the most credible site about Chinese news.

The Falun Gong anyday has more credibility in front of the world than xinhua & the commie thugs of the PRC. The whole world knows how PRC lies & fudges their economic statistics.