PRC Economy and Industry: News and Discussions

[vina]

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

True. But "underdeveloped" China thinks that it too must do the Japanese bridges to nowhere

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.

Sorry. You are economically illiterate. That is exactly what GDP numbers mean. The sum total of output of "that means food, housing, education, transportion, power, communication, entainment etc" . Yes. The Japanese and Americans are around 10 times more in dollar terms (Nominal GDP) and around six times in PPP (the $5 coke in Japan costing $1 in Japan is the PPP adjustment).

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.

Yes. But getting from 30/40 to 10 is the easy part. All you needed to do is import technology and do basics like moving farmers into factories and build infrastructure. The next level becomes a steep vertical climb. That is the harder thing to do.

And I do hope that to go from 10 to 3,4,5 times, you dont burn 30 times more coal than you do at present and also consume 5 times more steel and aluminium and electricity. If that is your plan, sorry, it is not going to happen. There are natural limits to that kind of growth.

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.

How about another statistic. China Burns more coal than US, Europe and JAPAN combined?. Uses more steel than the rest of the world combined has an automobile market that was the size of the US 28 years ago, and US has just a fifth of the population of China! Get real.

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.

There are world bank reports that show that the TERMS of trade have suffered measurably for China. Prices have dropped, the value of imports are rising faster than value of exports, pricing power of Chinese exports have been hit. Go to the world bank site and download it. I dont know whom you have been talking to, but that is reality . Face it!.

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.

I really dont think we will (like burning 3b tons of coal a year). And we will NOT do the exact same thing as Chinese did. We CANNOT do it. Our economies are structured differently. Our energy needs will be met more from nuclear (the 3 stage Indian Thorium plan will gestate by 2020 fully, when we will have enough thorium from fast breeders matured to use thorium, and the thorium fuel can be used after the 3 stages, and in any case, the 123 agreement will allow conventional nuke plants to come up without any fuel bottlenecks) Thorium Fuel Cycle in India,India's three stage nuclear power program. Nothing else will work in the Indian context for bulk base power. Coal and fossil fuel will be used too,but not in the scale and proportion as China.

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.

I am talking about the Shenzen business model that leveraged the entreprenurial skills and the talent of the chinese people rather than the top down Communist command economy of Harbin and Shanghai in the earlier days. Shenzen and the Pearl River delta is what kick started China. Before 1978 and as late as 1984, China was on it's knees and had a serious foreign exchange crunch and one of the main source of USD was supplying knock off soviet weapons to Iran in the Iran -Iraq war. Iran was under a weapons embargo from both the west and soviet union and china was the only source of weapons. In fact, Deng's liberalization and Saddam Hussein (who invaded Iran) was the savior of China. Saddam was the "savior" of India as well, because when he invaded Kuwait in 1990 , that oil shock and foreign exchange crisis was what forced India to change tracks from the command economy in 1991. The shock happened to China some 12 years earlier and that is the exact difference between India and China (the gap is around 5 to 12 years depending on which sector you are looking at). Until 1984 for China and 1991 for India both were begging for USD and were regular IMF loan takers (in fact largest). If you are too young to know of it , learn it from here. The commie propaganda ministry is not going to tell you the facts.

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

. Err. No thanks. The railway engines you sold Pakistan are unservicable, broken and unuseable and now they are tendering for engines from reputed global makers.
As far as India is concerned, the private players who went for Chinese boilers and electrical equipment in the first flush have burnt their fingers badly (equipment breakdowns, downtimes, bad reliability) and are now coming back in droves back to BHEL and others like L&T-Mitsubishi

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.

Largest global guys like Arcelor and Corus and others are at less than 100% utilization ,and you say Chinese industry on an average makes big profits in steel. Well, I have a bridge to sell to you. At best they will be operating at break even levels and many of the excess capacity will have been idled. No two ways about it. Otherwise, prices would have plunged to levels where no one makes any money.

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.

Oh, we do all that. BHEL openly puts that it's turbines are Siemens and GE license, Boilers are Alstom, Babcox and Wilcox, and which ones are BHEL designs. And yes, they and others do make equipment upto 1000 MW capacity that the Chinese do as well. But somehow only Chinese (and Koreans) seem to pass of licensed made foreign equipment as "Chinese" and violate license terms by exporting (Doosan did that too, they exported Altsom licensed equipment which Altsom said they didn't have the license to do and the 21% duty was put in precisely to stop that, because if that was the case, no one would by made in India licensed equipment where the license payments to vendor had to be made) . That is called criminal behavior by any book.

You keep talking about Shanghai Meglev project. You must think we Chinese are a bunch of idiots to pay that price without technology transfer.

Hmm. Wonder why Angela Merkel had such strong words on the Chinese theft of maglev technology if it was "transferred" , same with the Siemens train technology.

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.

To do that you actually have to design and build competitve products that compete on things other than price and financing. Making "mushrooms" out of foreign designs and then selling that to other markets is not a way for long term success. Sorry. That East Asian model has run it's course. No one has any tolerance for that kind of thing anymore.

[Rahul M]

one little fact about chinese origin power equipment, our commie govt bought these to show their love to chicom and the equipment broke down on the very first day (!) resulting in a minor power crisis in kolkata suburbs.

[Raja Bose]

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.

Econ-101 my friend, econ-101. It is all right to be patriotic but not blindly so.

[vina]

one little fact about chinese origin power equipment, our commie govt bought these to show their love to chicom and the equipment broke down on the very first day (!) resulting in a minor power crisis in kolkata suburbs.

Rahul, the craze for Chinese equipment (cheap and available off the shelf ) is over. The folks who went and bought it have burnt their fingers. It is the same Chinese "experience" like buying trinkets (works twice and packs up) all over again. Per this link

Asked about competition from China, Krishnan said: “The Chinese power equipment manufacturers do not any more pose a threat to BHEL as many of the power companies are burning their hands with the foreign equipment and are coming back to us”.

“Orders for power generation equipment for a capacity of 15,000 MW have been placed with us by companies who had earlier ordered Chinese equipments,” he added.

Jaypee Group, Jindal India Thermal Ltd, Pipavav Energy, India Bulls Group, Jhabua Power, Adhunik Power, Abhijit Infra are some of the power generators which have come to BHEL after placing orders with Chinese equipment manufacturers.

Also L&T-MHI has won orders from folks who earlier went with Chinese power equipment. In India the capacities are stretched to the maximum and there is a backlog and I am glad that L&T entered the industry at the exact perfect moment. Good for the industry and a very good long term decision for L&T as well and good for the country overall.

From folks I spoke with , the power plant and boiler auxiliaries from the Chinese are very unreliable,break down prone, under powered and overall the systems have pretty poor performance in Indian conditions (Indian coal has high ash content in addition) with low uptimes. For private guys that will kick them in where it hurts most, in their profits. So once they have burnt their fingers, they will come running back and not touch the Chinese again.

[wlin]

Sorry. You are economically illiterate. That is exactly what GDP numbers mean. The sum total of output of "that means food, housing, education, transportion, power, communication, entainment etc" . Yes. The Japanese and Americans are around 10 times more in dollar terms (Nominal GDP) and around six times in PPP (the $5 coke in Japan costing $1 in Japan is the PPP adjustment).

That does not mean China collect its GDP the way as US did. We still use the Soviet style way to collect GDP numbers. So that result a very low service part. China collect added value of agriculture, industrial and service and added them it is GDP. This way is quite different from US way. Like for consumption, a lot of people will jump out to say China only consume 30% something of GDP. The consume number they use is retail sales number. In West, the consumption means not only retail sales but health care, education, etc a lot of service consumption there. Like for housing, even you fully own the house and no cash spending on it, you still create GDP for ownership rent. This rent is 10% of US GDP. China does not have this kind of number and have no understanding why you own the house and spend no money on it but still create GDP. All these tricks is difficult for us to understand. For PPP, that is rubbish. The standard got change everyday.

Again, we value what you can build.

Yes. But getting from 30/40 to 10 is the easy part. All you needed to do is import technology and do basics like moving farmers into factories and build infrastructure. The next level becomes a steep vertical climb. That is the harder thing to do.

And I do hope that to go from 10 to 3,4,5 times, you dont burn 30 times more coal than you do at present and also consume 5 times more steel and aluminium and electricity. If that is your plan, sorry, it is not going to happen. There are natural limits to that kind of growth.

Who told you to become 3, 4, 5 times we need to burn 30 times more coal. We burn that much coal is because we need provided basic thing for average people. The people earn 10K USD and people earned 1K USD use the same amount coal for winter heating.

How about another statistic. China Burns more coal than US, Europe and JAPAN combined?. Uses more steel than the rest of the world combined has an automobile market that was the size of the US 28 years ago, and US has just a fifth of the population of China! Get real.

This is not good. But coal is what we have. We did not use as much oil and gas as they have. Besides we have more people than them combined. For automobile market size, yes that is true. So what is big deal?

There are world bank reports that show that the TERMS of trade have suffered measurably for China. Prices have dropped, the value of imports are rising? faster than value of exports, pricing power of Chinese exports have been hit. Go to the world bank site and download it. I dont know whom you have been talking to, but that is reality . Face it!.

Funny statement. I just speak what i saw in the August for my business. World bank report? What is that?

I really dont think we will (like burning 3b tons of coal a year). And we will NOT do the exact same thing as Chinese did. We CANNOT do it. Our economies are structured differently. Our energy needs will be met more from nuclear (the 3 stage Indian Thorium plan will gestate by 2020 fully, when we will have enough thorium from fast breeders matured to use thorium, and the thorium fuel can be used after the 3 stages, and in any case, the 123 agreement will allow conventional nuke plants to come up without any fuel bottlenecks) Thorium Fuel Cycle in India,India's three stage nuclear power program. Nothing else will work in the Indian context for bulk base power. Coal and fossil fuel will be used too,but not in the scale and proportion as China.

Well, if India wants to stay that way, nobody in this planet would compain.

I am talking about the Shenzen business model that leveraged the entreprenurial skills and the talent of the chinese people rather than the top down Communist command economy of Harbin and Shanghai in the earlier days. Shenzen and the Pearl River delta is what kick started China. Before 1978 and as late as 1984, China was on it's knees and had a serious foreign exchange crunch and one of the main source of USD was supplying knock off soviet weapons to Iran in the Iran -Iraq war. Iran was under a weapons embargo from both the west and soviet union and china was the only source of weapons. In fact, Deng's liberalization and Saddam Hussein (who invaded Iran) was the savior of China. Saddam was the "savior" of India as well, because when he invaded Kuwait in 1990 , that oil shock and foreign exchange crisis was what forced India to change tracks from the command economy in 1991. The shock happened to China some 12 years earlier and that is the exact difference between India and China (the gap is around 5 to 12 years depending on which sector you are looking at). Until 1984 for China and 1991 for India both were begging for USD and were regular IMF loan takers (in fact largest). If you are too young to know of it , learn it from here. The commie propaganda ministry is not going to tell you the facts.

Again, you know nothing about this. Chinese never take IMF loans. We took quite some world bank loans. But never IMF. About begging, we are not good at that. As usual, you better check you source.

. Err. No thanks. The railway engines you sold Pakistan are unservicable, broken and unuseable and now they are tendering for engines from reputed global makers.
As far as India is concerned, the private players who went for Chinese boilers and electrical equipment in the first flush have burnt their fingers badly (equipment breakdowns, downtimes, bad reliability) and are now coming back in droves back to BHEL and others like L&T-Mitsubishi

My bad, it is for subway.

Largest global guys like Arcelor and Corus and others are at less than 100% utilization ,and you say Chinese industry on an average makes big profits in steel. Well, I have a bridge to sell to you. At best they will be operating at break even levels and many of the excess capacity will have been idled. No two ways about it. Otherwise, prices would have plunged to levels where no one makes any money.

Maybe in the future, but not now. We will see.

Oh, we do all that. BHEL openly puts that it's turbines are Siemens and GE license, Boilers are Alstom, Babcox and Wilcox, and which ones are BHEL designs. And yes, they and others do make equipment upto 1000 MW capacity that the Chinese do as well. But somehow only Chinese (and Koreans) seem to pass of licensed made foreign equipment as "Chinese" and violate license terms by exporting (Doosan did that too, they exported Altsom licensed equipment which Altsom said they didn't have the license to do and the 21% duty was put in precisely to stop that, because if that was the case, no one would by made in India licensed equipment where the license payments to vendor had to be made) . That is called criminal behavior by any book.

I do not know what license means in your consept. I can assure,
1, We do not send money to GE or Siemens or whatever for what we produced.
2, We can produces as many as we want.
3, The parts come from domestic sources.
They can keep claiming whatever they want, otherwise, how can make easy sell to other market. If they want, they can alway withdraw from Chinese market. You know somehow China rising itself is criminal behavior in some people's eyes.

Hmm. Wonder why Angela Merkel had such strong words on the Chinese theft of maglev technology if it was "transferred" , same with the Siemens train technology.

I can understand her. They never believed we can really figure it out. No body is fool. They agree the terms on the assumption that they do not believe Chinese can figure out the whole thing. Normally, they will transfer you 90% of the technology and keep 10% themselves. This 10% is critical and they won’t tell you. You need to figure out it yourself. If you can not, then pay the money for the upgrade or next generation product and you are good citizen. If you can, you are criminal and thief. Francis Cabot Lowell is thief in British's eyes. But he is a hero in US and got a city named after him.

The West just think they are superior and only they can produce the high end stuff and think China as a normal 3rd world country which can only keeping buying and upgrading. They probably wrong about this.

To do that you actually have to design and build competitve products that compete on things other than price and financing. Making "mushrooms" out of foreign designs and then selling that to other markets is not a way for long term success. Sorry. That East Asian model has run it's course. No one has any tolerance for that kind of thing anymore.

We will finance it. You will see in the next decade. People here are talking about a Chinese "Marshall Plan". We do not want other people to repeat East Asian model. This path already too crowded. We are smart enough not to want more competitors. Unlike US, we won't promote anything ideological. We want everybody keep democracy themselves. But loan to developing country and build infrastructure for them, by Chinese labor and equipment of course. So they can improve their economy and produce and sell more items to us. And in the mean time they become richer and can buy more Chinese stuff. You know, the more developed the 3rd world country become, the better for China. This process will be very slowly, but in 20, 30 years. It will be a totally different world.

[rsingh]

Vina saar you are answering an paid poster who is paid according to performence.............this guy is ready to stab himself to prove the point. Cut the race saar.....ignorance is the right punishment these nut cases. Salam

[wlin]

ignorance is the right punishment these nut cases.
Good say, Man

[vina]

Vina saar you are answering an paid poster who is paid according to performence.............this guy is ready to stab himself to prove the point. Cut the race saar.....ignorance is the right punishment these nut cases. Salam

I know. However, the reason I am posting is that this is the PRC Economy thread after all. I just hope that in putting down my thoughts here and puncturing the bombast of the "Drone - Acharyas" (eg. we measure the GDP the Soviet way .. but then we also turn around and claim that we are the 2nd largest economy and passed Japan which is measured in the "Western" way . China , makes all it's equipment for power electricals by itself..yeah.. xerox khan like rubbing out nameplates, china's first "Godson" chip, where all the worthies did was rub out the name Motorola from the chip ) , is to really help understand that behind this massive chinese growth is an unsustainable use and waste of resources and a massive misallocation of capital on an unprecendented scale.

I was in fact struck by the amount of coal and energy that China uses. According to this first comprehensive survey of China's power sector Greener Plants, Grayer skies? by MIT, the following is stark and stands out well.

It says the stereotype of

“China builds crap, it burns crap, and it doesn’t give a crap.”

is far more nuanced and that there have been pretty deep changes in the past 10 years.

Much of China's coal has around 17% upwards of ash content. So of the roughly 1.5B or 3B or whatever tons the Chinese moved by railways, close to 250M tons or 500M tons moved was uburnable ash that gets collected in ash ponds and lower the efficiency of the system,and the moisture content again tends to be in the level of 5 to 10%, which in addition to lowering efficiency (you spend heat in turning the water vapor -latent heat of vaporization that goes out into the atomsphere along with flue gases!) adds to around 20 to 40 million tons of essentially water that was transported!

Just gives you a sense of the amount of waste in the transportation (assuming by rail alone). It is mindboggling

The MIT report is extremely interesting. Contrary to what the Chinese posters seem to say, the definition of a "large" plant in China is > 300MW and contrary to the impression posted here of the bulk of chinese plants being super/ultra critical with 600/800/1000 MWs and HVDC lines evacauting, that picture is not true. Just like India the recent Chinese plants are that kind (India has an advantage, our plants are coming up now, we don't have a legacy problem and the private guys putting up plants after the power sector has been liberalized are putting up the latest plants with cutting edge tech. Our older plants too are pretty good and have all environmental safeguards and stuff like SO2 scrubbers and particle traps etc built in and always had them).

But all in all, this Chinese economic model makes one sit back and be very skeptical about the long term sustainability of it all , both economically and ecologically.

Nope. A train wreck is coming. Question is when. The Soviets took 60 years. For the Chinese it might be a bit longer. The soviets were the 2nd largest miltary power and had massive technological and other accomplishments quite on par with anyone else when they collapsed, all because of Econ 101.

[Theo_Fidel]

But all in all, this Chinese economic model makes one sit back and be very skeptical about the long term sustainability of it all , both economically and ecologically.

Nope. A train wreck is coming. Question is when. The Soviets took 60 years. For the Chinese it might be a bit longer. The soviets were the 2nd largest miltary power and had massive technological and other accomplishments quite on par with anyone else when they collapsed, all because of Econ 101.

I've often said that if you ignore the razzle dazzle China is most similar to the Soviet economy 1950-1980.

There were stunned commentators even back then when it was realized that the Soviets produced more steel, more coal, more electricity and more cement than the West. All the stunning Soviet growth back then was based on increasing inputs more and more and more. There were cries that the Soviet system was superior as it was ruthless, very efficient, blah, blah, blah..

Economists today agree that all of the growth was based on two ideas.
1. A willingness to postpone consumption today for production tomorrow.
2. A willingness to project yesterdays growth rates to tomorrow.

Remind you of someone does it not..

As we know now, we see how it all ended. What did the Soviets in was the law of diminishing returns. At some point more and more inputs does not lead to more output. For instance the Koreans produce steel with 1/3 the energy used by the Chinese. It is not as easy as Panda thinks to get it down that much, as they will find out shortly.

It is easy to grow when you have unlimited inputs. This can not last. The real challenge is to grow when electricity is $0.50 cents a kilowatt and steel is $500 a ton.

At some point, all that China has built so far will have to be torn down. It is all 100% built on wage arbitrage. To break out of this middle income trap all this must be given up. The next stage is not so easy. Money means nothing. If it did Microsoft would own the world by now.

The first people to spot the true story of the Soviet industrial might was the Economists. Then as now they were the first to point out the fatal fallacies and assumptions underlying both growth systems. The first lesson to be learned is that sustained growth is only possible with increasing productivity from the same unit of input. Since Panda does not have a system to provide such growth it is doomed. Reminds me of Morning Light Mountain, for those who get the reference.

China could begin with a lesson in humility and free the minds of its people. Esp. of the kind of propaganda trash put out by the Govt sponsored robots here. As long as they exist we have nothing to fear. People of their ilk have destroyed China many times before.

[TonyMontana]

China could begin with a lesson in humility and free the minds of its people. Esp. of the kind of propaganda trash put out by the Govt sponsored robots here. As long as they exist we have nothing to fear. People of their ilk have destroyed China many times before.

Facinating analysis. I wonder what China will do to get out of this one, or maybe we are doomed as you say. And you are right, the only people that can and have destroyed China are the Chinese.

I'm not a economist, so here is a honest question, pardon my ignorance. The USSR was a command economy. China today is a market economy. Is your comparison still valid? Did the USSR collapse because of economics? Or because of politics? Since China is no longer a command economy, would market forces eventually demand a higher effeciency? Or do you believe the collective Chinese market will not see it coming?

I think the future collapse of the Chinese economy should be looked at from the point of view of the future collapse of the american economy. As in, how does a market economy fail?

Another talking point. Since you and I all see this. Many economists in the world sees this. Why doesn't the CCP see this? Are they unwilling to do something about it? Or incapable?

[Hari Seldon]

Since you and I all see this. Many economists in the world sees this. Why doesn't the CCP see this? Are they unwilling to do something about it? Or incapable?

Err, nothing that complicated.

The answer, IMVVHO of course, as we are seeing currently in the US case, is simply kicking the can down the road for future generations to break their heads over.

Human nature is to blame, some say. Postponing difficult decisions so as to prolong the current comfort zone a wee bit longer is all the rage in east and west, apparently.

[nandakumar]

vina wrote
quote:

Much of China's coal has around 17% upwards of ash content. So of the roughly 1.5B or 3B or whatever tons the Chinese moved by railways, close to 250M tons or 500M tons moved was uburnable ash that gets collected in ash ponds and lower the efficiency of the system,and the moisture content again tends to be in the level of 5 to 10%, which in addition to lowering efficiency (you spend heat in turning the water vapor -latent heat of vaporization that goes out into the atomsphere along with flue gases!) adds to around 20 to 40 million tons of essentially water that was transported!
end of quote
an ash content of 17 per cent is not a problem. indeed indian coal has on an average 35 per cent (according to central fuel research institute, dhanbad). depending on the type application (use in cement/sponge iron/power manufacture) beneficiation to the required extent should be able to handle it without serious impairment to the economics of end product manufacture. use of fly ash bricks in construction has resulted in what was a waste product into a lucrative by product.

[vina]

an ash content of 17 per cent is not a problem. indeed indian coal has on an average 35 per cent (according to central fuel research institute, dhanbad). depending on the type application (use in cement/sponge iron/power manufacture) beneficiation to the required extent should be able to handle it without serious impairment to the economics of end product manufacture

High ash content in Indian coal is indeed a big problem. What is done is to to "wash " the coal in washeries and also import low ash low sulfur coal for blending (both thermal coal and for coke.. india coke reserves are pretty low anyways). Yes, benefication is indeed necessary and is done for Indian coal.

So in India too, the problem remains for remote powerplants set up far away from coal resources. Such plants either depend on imported low ash coal , or washed coal and/or blend.

The Chinese simply dont do any washing of their coal per the MIT report. It is precisely for that and to insulate the project from the vagaries of coal supply, the Indian plants are usually in close proximity/pit heads to the coal resources, the power plants get captive mines for the economic life of the plant and only then you can hope for financial closure and to start a project.

At worst , the coal plant will be on a rail line for supply of coal. However per the MIT report the bulk of Chinese power plants have depended on trucks for their coal!.

use of fly ash bricks in construction has resulted in what was a waste product into a lucrative by product.

True, fly ash bricks do make lemonade out of lemons, but all the same, it got transported 1000s of kms and got fired reducing overall efficiency. Given a choice, you would rather have that the weight of fly ash was carbon so that you could have generated power. It is precisely for such reasons, pit head generation makes the absolute best sense, especially now when you have HVDC bulk power evacuation at 95% and above efficiencies!

[vina]

Economists today agree that all of the growth was based on two ideas.
1. A willingness to postpone consumption today for production tomorrow.

Maybe you meant 1) A willingness to postpone consumption for tomorrow for production today

The first lesson to be learned is that sustained growth is only possible with increasing productivity from the same unit of input.

Absolutely. Any growth model worth its salt (Solow etc) will tell you that in the long term it is productivity ALONE that will give you sustained economic growth.

In fact, Paul Krugman explained the SE Asian "miracle" saying that it was really not a "miracle" and could be explained largely by factor inputs such as land, labor and capital and that it was not sustainable. He was proven right in the mid 90s when the currency crisis hit and SE Asian (malaysia, thailand, Indonesia etc) growth rates have never been the same again. China is a massive massive more SE Asian miracle, based on exact same factor inputs. If the SE Asian countries are finding it well nigh impossible to break out of the middle income trap, China will find it incrediby more hard . It will already reach middle income soon ( $6K per capita thereabouts).

[manish]

Economists today agree that all of the growth was based on two ideas.
1. A willingness to postpone consumption today for production tomorrow.

Maybe you meant 1) A willingness to postpone consumption for tomorrow for production today

The first lesson to be learned is that sustained growth is only possible with increasing productivity from the same unit of input.

Absolutely. Any growth model worth its salt (Solow etc) will tell you that in the long term it is productivity ALONE that will give you sustained economic growth.

vina saar, pleej to forgive this OT transgression, but I always wanted an opportunity to say:

Economics must be the only field where Growth is Solow

Had waited to get it out of my head since the day I first heard someone talk about the Solow Growth Model!!

[vina]

The USSR was a command economy. China today is a market economy. Is your comparison still valid? Did the USSR collapse because of economics? Or because of politics? Since China is no longer a command economy, would market forces eventually demand a higher effeciency? Or do you believe the collective Chinese market will not see it coming?

The best way to characterize China today is as a "mixed" economy, with a vibrant entrepreneurial private sector that is export focused (the Shenze/Pearl River model) and the command economy of the Govt owned and govt driven sector (what I called Harbin model). Problem is the govt for reasons of "commanding heights" has reserved large swathes of the economy, especially that which is of large scale , size and effect for itself (banking, steel, power, airlines, telecom.. a big big list ). By no means is China a market economy. In fact a argument can be made to deny China market economy status for the sectors in govt control. That is the rather sad fact.

The competitive market driven segment of the Chinese economy has been restricted to making toys, trinkets and other low end Wal-Mart and K-Mart stuff. Why not even a PC assembler in China is private!

Soviet union collapsed because of economics. The politics is secondary. Bankruptcy came first.

Another talking point. Since you and I all see this. Many economists in the world sees this. Why doesn't the CCP see this? Are they unwilling to do something about it? Or incapable?

That kind of economy creates its own vested interests and support and patronage politics it is close to impossible to stop that of thing and give up power and dismantle what successfully worked thus far and bash your own support base and build something brand new , that is untested so far.

It is not a dilemma just an entity like CCP faces. We face that in the corporate world every day. Do you continue to invest in doing what you did all these years and what do you do with a disruptive innovation that threatens to derail your fundamental business model.

I would suggest reading up "Innovators Dilemma" by Clayton Christiensen ( a landmark work, a magnum opus) or stuff in Blue Sky vs Red Sky to see why just like large giant successful corporations , the CPC too is in the horns of it's own dilemma.

[starek]

The best way to characterize China today is as a "mixed" economy, with a vibrant entrepreneurial private sector that is export focused (the Shenze/Pearl River model) and the command economy of the Govt owned and govt driven sector (what I called Harbin model). Problem is the govt for reasons of "commanding heights" has reserved large swathes of the economy, especially that which is of large scale , size and effect for itself (banking, steel, power, airlines, telecom.. a big big list ). By no means is China a market economy. In fact a argument can be made to deny China market economy status for the sectors in govt control. That is the rather sad fact.

http://uglyboots.retailerdvd.com/2010/0 ... terprises/
Jiangsu Sha Steel Group Co., Ltd. to 146.313 billion yuan of business revenue in the second year Reaching the top
No.6 is an airline in this list.

[wlin]

The Chinese simply dont do any washing of their coal per the MIT report. It is precisely for that and to insulate the project from the vagaries of coal supply, the Indian plants are usually in close proximity/pit heads to the coal resources, the power plants get captive mines for the economic life of the plant and only then you can hope for financial closure and to start a project.

43% of Chinese coal is washed but only 20% of power coal is washed. The US number is about 40% of power coal got washed. China’s power coal is among the world’s best quality power coal, that is why it got a lower wash percentage than overall coal production.

[wlin]

To understand the truth, you need hear two sides of the story. There is a chance the truth may be between them. The Chinese economy number is a myth in West and somehow the West economists never get it.

It is because the real economic meaning lost in term translation. This is just for your information. Because of my performance I already got huge bonus from my boss.

There are three ways to calculate GDP, Expenditure approach, Income Approach and producation approach. China use the production approach to calculate, while West use Expenditure approach to calculate. And in Expenditure approach, you get Consumption, Investment and Trade Surplus and add them together, you get GDP. Chinese way is different, we use different sector production added value and added them together. Since China has an old Soviet style statistical system, the people and infrastructure already there. So they use that resource to collect the data. It is convenient for them. For example, for industry, they only collect data from enterprise with over 500 employees. For those below 500 employees, they use the latest census proportion data. The census happened in every decade.

In this way, there is no way to get Consumption, Investment data in West national accounts concept. But they have some other data that has been collected since 50s. So they use that as a substitute. So for Consumption, we got Total retail sales of social commodities, Chinese is called 社会消费品零售总额. The year 2009 number for it is 12.5 trillion, while the total GDＰ is 34 Trillion RMB. That is why the 36% consumption data come from. This consumption does not include any service consumption except hospitality industry. It does not include education, health care, housing, entertainment, financial, law service etc which all included in the West consumption concept. Chinese do not think education, health care, housing those kind of thing as consumption. Chinese regard those as cost/expense that reduce the ability to consume. If you know chinese and go to Chinese forum, you can find thousands of posts complain the high education/health care/housing cost prevent them to consume. In China, consume means buy real stuff. Apparently, they did not take economy 101.

So use this number as consumption is way underestimated the consumption role in China economy. That is why with almost every consume products, China market size ranks world top2 and people still say we not consume at all. If you compare the US retail number’s percentage in their GDP, it will be very similar to China percentage. There rent is 10% GDP, health care 14% or 18% GDP and they have so many lawyers and a big fat Wall Street there. They are all classified as consumptions. American people must be very satisfied with their top-tier financial service consumption.

Then let’s talk about investment. There is no investment data in West national account concept collected. Instead, they collect Fixed Asset Investment, Chinese term固定资产投资. This number has been collected for more than half century. The 2009 number is 22 trillion. People use this number as investment because it well collected and this number confused people. This number includes land purchase expenditure which exclude in West national accounts concept investment figure because they do not think it added any value to the economic activity. But in Chinese eyes, if you invest in a factory or building, you need buy the land and that is from their pocket, then of course it belongs to investment. Considered the high land price today in China, a big chunk of fixed asset investment is on land purchase.

Another one is old land/building/equipment purchase，for example, you want to enter one certain industry, you either buy new land and build your facility and install new machinery or you can buy one old factory and kicked in right away. Chinese number included this old land/building/equipment purchase and West investment does not included. For Chinese, no matter old or new, your money spend on investment, of course it can be called investment. For West concept, it is just change hand without no new value added, so not included in their investment figure.

One more part, is the Chinese fix asset investment figure does not included stock change, while the West concept do. We regard this as investment on fixed asset. So what hell is stock about. All these three things combine, you got a overestimated investment.

For trade surplus, we do not include service trade surplus. China got a 30 billion deficit on a 280 billion service trade last year. Anyway it is not that big.

BTW:　China authority never claimed the社会消费品零售总额 is the corresponding part of West Consumption and 固定资产投资, the corresponding part of West Investment. The economics geniuses interpreter that way.

So without these understanding of number, how come you can draw any conclusion? It is always amusing me how these simple facts missed out by those so-called economists. Maybe they have learned too many economics 101.

[vina]

To understand the truth, you need hear two sides of the story. There is a chance the truth may be between them. The Chinese economy number is a myth in West and somehow the West economists never get it.

It is because the real economic meaning lost in term translation. This is just for your information. Because of my performance I already got huge bonus from my boss.

There are three ways to calculate GDP, Expenditure approach, Income Approach and producation approach. China use the production approach to calculate, while West use Expenditure approach to calculate. And in Expenditure approach, you get Consumption, Investment and Trade Surplus and add them together, you get GDP. Chinese way is different, we use different sector production added value and added them together.

Nice try. There are multiple ways to calculate GDP and they are all equivalent. In fact, most countries report the calculations in multiple ways and it is not a "Chinese one way" and others another way. One of the ways in is the value addition approach that you mentioned. In fact today the controversy in the TV channels in India is for the latest quarter GDP no in India there is a bigger than usual discrepancy in the figures calculated by the income and expenditure approaches and the govt acknowledged that there is a mistake in the expenditure calculation and will release revised calculations!.

So, whether you add 2+3 or 3+2 it is all 5. Just because you are Chinese, if you add 3+2, it does not become 6!.

Apparently, they did not take economy 101.

It is obvious that they didn't. Because even if you don't know actual consumption (per standard definitions), if you do know GDP (calculated from other methods) and investments and net exports etc, it is simple arithmetic (a 6th grade kid can do it) to get consumption! Point is when you do it, the figure comes to a piffling amount for China.

Maybe they have learned too many economics 101.

Maybe the Chinese statisticians should go back to using the great chinese invention called abacus and learn how do do basic arithmetic and algebra to get their consumption and other numbers from their own calculations!

[wlin]

In theory they do. In reality they they do not. China donot collect numbers in many service factors, so how they added up. Anyway, the hard retail number is 36% of Chinese GDP, the fixed asset investment included land purchase, old land/building/equipment purchase and does not include stock change. These are facts and let us wait to see how long it take those economy geniuses find out.

[Theo_Fidel]

The USSR was a command economy. China today is a market economy. Is your comparison still valid? Did the USSR collapse because of economics? Or because of politics? Since China is no longer a command economy, would market forces eventually demand a higher effeciency? Or do you believe the collective Chinese market will not see it coming?

The best way to characterize China today is as a "mixed" economy, with a vibrant entrepreneurial private sector that is export focused (the Shenze/Pearl River model) and the command economy of the Govt owned and govt driven sector (what I called Harbin model). Problem is the govt for reasons of "commanding heights" has reserved large swathes of the economy, especially that which is of large scale , size and effect for itself (banking, steel, power, airlines, telecom.. a big big list ). By no means is China a market economy. In fact a argument can be made to deny China market economy status for the sectors in govt control. That is the rather sad fact.

Vina,

I would hesitate to say the Chinese economy is mixed. This would imply there are multiple poles of control. There is only one pole of control, the state. The private economy is tolerated and has no control. For instance the private eonomy has produced few billionaires. Most have come from within the CPC or officialdom.

Even the private economy is predicated on cheap inputs for its success. The best test for this is to imagine moving it to another country. Silicon valley would be just as innovative if it was plunked down in Siberia. Guangdong, not so much.

It is a source of mirth to think the Panda robots think their economy to be a market based one.

[wrdos]

Hehe, you are so good at talking. I have long given up debating with anybody on this forum, since i have no hope to win.

I have been on this forum 7 years, and through these 7 years people here discussing how china is going to collapse, excitingly always. At the early time, i tried to debate but, as expected, I lost every time hehe.

7 years already, the gap between China and India is much wider than it was 7 years ago.

Today I have been on this forum 1.5hours. Within this time period, averagely 15km new roads, 1km new expressway and 2km new high speed railway would have been finished by the hard working chinese workers back in China. It is about midnight 1am in China, but i know millions of them are still working thousands of sites or "slave factories" around the country to pursue a better life for themselves and for their families.

I am going to sleep now. I am sure by tomorrow morning, the gap between the 2 nations will be bigger than right now.

Hehe, a collapsing China is religion of many people here. They agree in their deep mind, unless China collapse, there is no hope left for a catching up.

It is the only hope or faith of them.

One day, Jesus will come back......
And on another day, China will collapse.

[paramu]

One day, Jesus will come back......

You are talking about wrong guys...

[Rupesh]

on another day, China will collapse.

Agreed...

[Manishw]

The chinese economy is going to collapse for sure but the collapse can take two ways-
1) Crash and burn.

2) stretch it out.

The second option does not seem suitable for the cpc while the first one coincides with the huge drum beats of 2012.Anyway this thing cant go on for more than a couple of year's(IMO).
I would go for 1) happening in 2012.
JMT

[krisna]

The Peak Oil Crisis: Prospects for China

it was announced that in July China's GDP surpassed that of Japan to become the world's second largest economy.

Can China maintain its growth spurt and beat the uncle in the next 2 decades---

There is no question that China has had 40 good years. Once the Chinese got over celebrating their revolution, the cult of the personality (Mao worship), and the more onerous features of Marxism-Maoism (such as shooting capitalists), they came up with a political-economic system, which while not democratic, served well to harness the country's strengths and set it on the way to rapid economic growth.

China has assembled a mixture of capitalism and socialism that undeniably yielded decades of impressive economic growth.

How did it become the world's factory-

By moving tens of millions of peasant farmers into industrial enterprises where they worked long hours, under harsh discipline, for poor wages, China soon became the world's preeminent factory producing an inordinate share of the globe's manufactured goods

How long can it last

The key question in all this is how much longer China's economic miracle can continue before the realities of finite mineral resources force a slowdown?

Reasons for possible economic slow down
1) likely shortage of raw materials like oil/coal

Rapid economic growth requires every increasing quantities of fossil fuels and other minerals. After forty years of hyper-exploitation of its domestic mineral deposits, China is now in a position where it must import half of its daily oil demand and is starting to import coal and other minerals as domestic sources become thinner and more difficult to produce.

2) climate change due to rapid industrialisation.

Recent events suggest that China may suffer disproportionally from the effects of global warming. This year the country was ravished by droughts, dust storms, and floods as increasing global temperatures worked their way on the weather patterns affecting China. If these changed patterns prove to be permanent feature of China's weather, droughts, floods, tropical storms, falling water tables and the melting of the Himalayan glaciers may force China into a survival mode where the struggle for food and water will trump industrial growth.

what china should do--

Beijing clearly recognizes all this and is moving to build a more efficient, less energy-intensive economy that can grow with less fossil fuel. Moreover, China's leaders are catching onto the notion that the costs of ignoring air and water pollution may eventually be prohibitive.

Can dlagon overtake uncle in the coming years

There are many unknowns and variables in all this, but it is a good bet that China's miracle of 10 percent annual economic growth has a half-life far shorter than many suspect.

[Sanjay M]

^^^China could stretch it out, just by lowering its exchange rate again.

They could effectively export a recession to the West.

China could mitigate any internal panic by imposing economic controls, if necessary.

[krisna]

18 miles long traffic jam north of beijing

State media said the latest jam on the Beijing-Tibet highway was caused by an accident and road maintenance.

dlagon sized problem for the dlagon because of

The main reason traffic has increased on the partially four-lane highway is the opening of coal mines in the northwest, vital for the booming economy, which this month surpassed Japan’s in size and is now second only to America’s.

[krisna]

Top China bank official's defection rumors quashed

U.S. government officials are throwing cold water on super-heated internal Chinese reports that the head of China’s top bank has defected.

But George Friedman, chief executive officer of Stratfor, said that the swirling rumors, which also accuse Zhou of overseeing a $430 billion loss on U.S. Treasury bonds, have little basis in fact and may instead signify a power struggle in advance of a leadership change in 2012
“We don't believe it either,” Friedman told SpyTalk, referring to the alleged $430 billion investment loss. But he added, “I'm less concerned about the number and the specific charges than the politics of a senior banker clearly under attack without the government stepping in and backing him. We really don't know what it all means, if anything, but the numbers aren't important.”

[krisna]

Stuck Behind the Great Firewall of China?

Want to know the best way to get tunnel the Great Firewall of China? So do you and many other expats, travelers, or Chinese people who just want to see what's going on with their friends over seas

1)

One way that used to be used to tunnel the Great Firewall (and I used myself) is free proxies or even paid proxies.

Seems that China caught onto that one and so the Great Firewall has become even higher.

2)

The other option is a VPN, and basically means that the Great Firewall of China thinks you're using a computer outside of the Peoples Republic, therefore sites are not blocked

[krisna]

Russian PM Launches Oil Pipeline To China

Russian Prime Minister Vladimir Putin on Sunday opened the Russian side of an oil pipeline to energy-hungry China in a ceremony in Skovorodino in the Far Eastern Amur region.

Putin said that the Russian part of the project, which would transport oil through Serbia to northeastern Chinese region Daqing, was completed.

Putin stated that the oil would start pumping into China later this year in spite of the fact that China was yet to construct 930km on its soil to link up the pipeline.

Analysts said Russia’s energy ties with China came after its recent spat with Ukraine, which refused to allow transit of crude oil to Russia’s European destinations over a dispute on gas payments last winter.

[krisna]

If Only China Were More Like Japan

China is heading toward a Japanese-style economic debacle, says columnist John Lee, who warns that the process won't be as gradual or peaceful

Now that China has officially overtaken Japan as the world's second-largest economy, there is growing speculation by influential Chinese and U.S. economists, such as Wu Jinglian and John Makin, that China will soon endure its own "lost decade" as it suffers a Japanese-style malaise.

why is it so

Like Japan in the 1970s and '80s, China is nearing the end of its reliance on exports and fixed investment to drive growth—and looking to shift toward policies that can enhance domestic consumption. To achieve this, it is seemingly blessed with an authoritarian government that can concentrate on policies that need not sacrifice the country's long-term interests for short-term political expediency.

1)

Yet, as Beijing's response to the global financial crisis reveals (bank lending jumped, from $750 billion in 2008, to $1.4 trillion in 2009), China is becoming more—rather than less—dependent on an unsustainable model to drive economic growth. Domestic consumption as a proportion of gross domestic product is actually declining. At just over 30 percent, it is the lowest of any major country in modern economic history. The figure has declined, from more than 50 percent in the 1980s, to 40 percent at the turn of this century. It was around 36 percent prior to the global downturn in 2008.

2)

the demographic problems in China, which will soon resemble Japan's.

3)

rule of law, property rights, and a stable political system are realatively under developed compared to Japan. Even though state-controlled enterprises (SOEs) produce between one-fourth and one-third of all output, they receive over 75 percent of the country's capital. During the flood of lending from 2008 to 2009, state-controlled enterprises received over 90 percent of all capital; private industry received less than 5 percent.

4) Asia' most unequal income spread

Since so much of the country's wealth is concentrated in approximately 120,000 SOEs (and their countless subsidiaries), a relatively small group of well-placed, well-connected insiders benefit, while opportunities to prosper are denied to the vast majority.

household incomes have increased by around 2 percent to 3 percent a year since 2000, while the coffers of the state-controlled sector enjoyed double-digit increases.

Despite impressive GDP growth, about 400 million people have seen their net incomes stagnate or decline over the past decade.

According to official data, the number of illiterate Chinese adults increased, from 85 million in 2000, to 114 million in 2005.

From 2001, a 2006 World Bank study indicates, the income of China's poorest 10 percent was declining by 2.4 percent every year, suggesting that absolute poverty increased when national GDP was growing by double digits every year.

what can happen to the inequality with weak financial institutions and relatively inefficient use of
state capital

Instances of mass unrest—124,000 in 2008 according to official figures—are increasing at more than twice the pace of GDP growth.

Beijing now spends more on internal security than it does on the People's Liberation Army.

By the CCP's own calculations, the country needs 8 percent GDP growth per annum for the Party to remain in power.

Unlike Japan, the vast majority of Chinese people will grow old and never be rich. This suggests that we are witnessing the rise of a profoundly fragile power.

ending does not look good for china according to author

It would be better for China if it were a lot more like Japan. Economic malaise eventually led to a peaceful change of government in Tokyo. If the same were to occur in China, the transition might not be as smooth.

[krisna]

duplicate post

[Sanjay M]

China's monopoly on 17 key elements sets stage for supply crisis
September 1, 2010

China's monopoly on the global supply of elements critical for production of computer hard disc drives, hybrid-electric cars, military weapons, and other key products — and its increasingly strict limits on exports — is setting the stage for a crisis in the United States. That's the topic of the cover story of Chemical & Engineering News (C&EN), ACS' weekly newsmagazine.

[TonyMontana]

This talk of China collapsing is facinating. I agree, all things are cyclic. Empires, like stocks, rise and fall. But like the stock market the million dollar question is when and how. (and if you're willing to put real money on it)

30 years ago. Would anyone predict where China will be today? Some time during these 30 years, China changed. Could China change again in the future?

Here's some food for thought. The Chinese government, with the exception of the highest level, is technically a meritocracy. A government job is BIG DEAL in China. I remember the story of 10,000 uni grads competing for one Job position in the government. What I'm getting at is the people that do the actual hardwork in the Chinese government, ie the analysis, detailed policy formation..etc are not dumb.

A distant relative of mine just got into the Ministry of Commerce and he's a freaking genious. What I'm getting at is, for a country the size of China to collapse, a lot of people with a lot of vested interests have to fvcked up a lot of times.

So to say the collapse of China is assured and soon, is a little...optimistic.

I mean, like the stock market, if you're so sure, you can make a lot of money shorting the Chinese.

[TonyMontana]

Maybe the Chinese statisticians should go back to using the great chinese invention called abacus and learn how do do basic arithmetic and algebra to get their consumption and other numbers from their own calculations!

You do realise that there are two sets of numbers right? The fudged one for world consumption and the real one for planning. The Chinese plan thing out to 50 years. To say the Chinese don't know what they're doing is...unrealistic.

[paramu]

Here's some food for thought. The Chinese government, with the exception of the highest level, is technically a meritocracy. A government job is BIG DEAL in China. I remember the story of 10,000 uni grads competing for one Job position in the government. What I'm getting at is the people that do the actual hardwork in the Chinese government, ie the analysis, detailed policy formation..etc are not dumb.

A distant relative of mine just got into the Ministry of Commerce and he's a freaking genious. What I'm getting at is, for a country the size of China to collapse, a lot of people with a lot of vested interests have to fvcked up a lot of times.

So was Soviet Union.

The basic question you need to ask is "Are there structural problems creeping inside China? What is the government doing to rectify that?" If they only parrot everything is fine, then you have something really to worry about.

[putnanja]

Here's some food for thought. The Chinese government, with the exception of the highest level, is technically a meritocracy. A government job is BIG DEAL in China. I remember the story of 10,000 uni grads competing for one Job position in the government. What I'm getting at is the people that do the actual hardwork in the Chinese government, ie the analysis, detailed policy formation..etc are not dumb.

The same can be said of the Indian bureaucracy, where the IAS exams are tough to crack and less than one in 10000 get through! In large populations like India and China, that is bound to happen

[naren]

Maybe the Chinese statisticians should go back to using the great chinese invention called abacus and learn how do do basic arithmetic and algebra to get their consumption and other numbers from their own calculations!

You do realise that there are two sets of numbers right? The fudged one for world consumption and the real one for planning. The Chinese plan thing out to 50 years. To say the Chinese don't know what they're doing is...unrealistic.

And you do realize that this is the same party which pulled of great leap forward and cultural revolution right ?