Bharat Rakshak

Car sale growth in China 'slows'

The growth of car sales in China slowed sharply last month, a report by a private research group suggests.

The number of cars sold in April was up 34% on the same month in 2009, while March's figure had been 63% higher.

The Shanghai-based China Passenger Car Association said 1.11 million cars were sold in April, down from 1.26 million in March.

...

"It's impossible for people to buy autos like they buy radishes or cabbages, and for most people autos are still precious goods requiring careful calculations and budgeting," the state-run newspaper Global Times said in an editorial. {Pig piladhel said it. No wollies onree}

China’s April Inflation Accelerates, Lending Surges ....
http://www.bloomberg.com/apps/news?pid= ... lqVg&pos=1

Seems the cooling off and tighter liquidity is not working. Btw, how do they calculate inflation in PRC? The CPC says the annual target is 3% while y-o-y monthly prices are rising 2.5%+ and the PRC certainly had no deflation during 2009.

New school attack sees more children 'hacked to death'

Gee, these embittered Chinese are as bad as the vindictive Pakis

In a one-child-only society, they really know how to hit where it hurts.
It looks like it's becoming a copycat trend.

Sanjay M wrote:New school attack sees more children 'hacked to death'

Gee, these embittered Chinese are as bad as the vindictive Pakis

In a one-child-only society, they really know how to hit where it hurts.
It looks like it's becoming a copycat trend.

Seems "picking on the little guy" is in their psyche.

Han soldiers pick on unarmed Tibetan monks.

Disgruntled abduls pick on helpless children.

This is what happens when you remove dharma from the society.

Love this .. Another Chinglish.

Exterminate Capitalism Lobster Package in a restaurant menu.

naren wrote:

Sanjay M wrote:New school attack sees more children 'hacked to death'

Gee, these embittered Chinese are as bad as the vindictive Pakis

In a one-child-only society, they really know how to hit where it hurts.
It looks like it's becoming a copycat trend.

Seems "picking on the little guy" is in their psyche.

Han soldiers pick on unarmed Tibetan monks.

Disgruntled abduls pick on helpless children.

This is what happens when you remove dharma from the society.

arun wrote:Being students seems to be rapidly set to joining miners as being a high risk occupation in PR China.

A third attack on children in school in as many days:

Five children hurt in third China school attack in three days

No question about it. The frequency of attacks of children in schools is certainly making being a student join mining as a high risk occupation in PR China.

most risky is being a political dissident or some unlucky guy whose land the local construction mafia wants.

China now consumes more coal than than the rest of the planet put together.

Incredibly they consume 4 times as much coal as the USA but only produce 1/2 the electricity.

This must be the single most energy inefficient society ever built in such a short time. Easily a tale for the rest of the world.. ..on what NOT to do.

They are not just burning their candle from both ends, they are also burning it from several places in the middle and soon intend to burn everyone elses candle as well.

http://www.theoildrum.com/node/6434

China's coal bubble..

It is true of course that China's coal consumption is enormous and growing, and that coal is the basis of the Chinese economy, fueling over 80 percent of electricity generation. China's coal output grew an astonishing 28.1 percent from first quarter 2009 to first quarter 2010, to over 750 million metric tons consumed in just the past three months. But this is a situation that is patently unsustainable—not just because of the carbon emissions it entails, but because China simply doesn't have enough coal to continue growing its consumption much longer.

Start with the stats and do some simple math. China is now mining and burning over three billion tons of coal per year. If the nation's coal consumption grows at, say, seven percent per year, that means consumption will double in ten years (its annual growth rate was actually over nine percent in one or two of the last several years, implying a doubling every eight years—but let's be conservative and assume seven percent growth). In that case, by 2020 China would be using about six billion tons per annum.

It takes some reflection to come to terms with the enormity of these figures. In 2000, China's coal consumption was only marginally higher than that of the U.S. Today, a decade later, it is three times U.S. consumption. (It is worth noting that the U.S. has double China's coal reserves.)

Combine unprecedented consumption levels with furious growth rates and you quickly arrive at absurdities and impossibilities. As in, it won't happen. The wheels will fall off the wagon first.

If It's Not There, You Can't Burn It

According to the World Coal Institute, China has reserves totaling a little over 110 billion tons. That's almost 37 years' worth of coal at current rates of consumption (i.e., three billion tons per year). But to assume that China won't have coal supply problems until 37 years have passed is also to assume two absurdities: that Chinese demand, production, and consumption of coal will remain constant; and that after maintaining this steady rate of extraction and consumption for 37 years, China will one day suddenly discover that its coal has run out.

In the real world, China's demand for coal is expected to grow. Adding ten percent annual consumption growth to the forecast would yield a reserves lifetime of only 16 years. While a sustained rate of growth this high is extremely unlikely, the principle is worth keeping in mind.

China will import 150 million tons (Mt) of coal this year, twice what it imported last year. That's not much, if we think of it as a percentage of the nation's total coal consumption. But that 150 Mt represents over 60 percent of the total exports of Australia, the world's top coal exporter. This means if Chinese imports double again next year—not an unrealistic scenario—China will need to import more coal than Australia can currently provide. One more doubling of import demand and China will be wanting to import 600 million tons per year, about the total amount of coal exported by all exporting nations last year.

China's economic bubble in some ways represents a microcosm of the entire industrial period—itself a relatively brief era of urbanization, fossil-fueled expansion, technological innovation, and unprecedented explosion of consumption. China has taken only two or three decades to accomplish what some other nations did over the course of a couple of centuries. This suggests that, for that country, implosion may come just as quickly.

China now consumes more coal than than the rest of the planet put together.

Incredibly they consume 4 times as much coal as the USA but only produce 1/2 the electricity.

This must be the single most energy inefficient society ever built in such a short time. Easily a tale for the rest of the world.. ..on what NOT to do.

They are not just burning their candle from both ends, they are also burning it from several places in the middle and soon intend to burn everyone elses candle as well.

Yes. Very very perspicacious observation. In fact, this was EXACTLY the rationale quoted by MMS and the Indian Govt when they signed up the 123 deal with Unkil. See, for all their faults, the Planning Commission and other monkeys in Govt have experience in doing this sort of stuff and actually dealing with the minutiae of building power plants and tying up fuel supplies, pricing and economics of the venture kind of thing. For India to increase energy production by 10 times or so, we cannot go the coal way like the chinese did. To do that, we will probably have to increase rail capacity by probably orders of magnitude and probably strip mine the entire Chottanagpur plateau! Heck, we cant get our act together to let someone get enough land to build a single steel plant!.

Yes sir. Nukes are in, distributed power is in, alternates are in.. Coal is out long term. India will have to live with expensive power (which anyway, will massively drive efficiency of use). No cheap power led development for us ..That is our destiny.

if one looks at a simple thing like CFL, pretty much everyone and their unkil have moved to CFLs in india, coming down to a bare bones 10W and peaking at 25W....which is less than 36W floor of filament bulbs, plus they last longer. for poor people there are subsidy schemes coming up to get them into CFL.

if one compares the massive use of halogen lamps and bulbs in western homes, the typical indic home is likely drawing far less power. and we dont have huge ovens and "Viking" fridges big enough for a homeless family to live in. and all our consumer apps are already bearing some low energy certifications except the cut rate chinese ones sneaking in. give a desi and option and he will use a fan rather than AC. most amirkhans cannot function without AC.

we reuse everything multiple times. nothing thrown in the dustbin is wasted. there are people rooting around and salvinging stuff 24x7.
sher khan throws it in landfills and forgets about it for 2000 years.

if the avg khanic trooper lived lean and ate less, they had have far more ready money to save and buy the next iStuff

^^^^
What genuises like MMS and co. can never wrap their minds around is the very simple and obvious fact that India needs a lot of cheap power and for that nuke power is a total misfit just like MMS is for his gaddi. India will go nowhere if power doesn't come cheap. Of course that suits the agenda of MMS & INC who wish to keep India at the slumdog level.

Nuke power apart from high lead times and huge capex comes with issues of fuel waste management and is amongst the most expensive ways to generate power. Nukes are so not in, not now, not *ever*. Coal is the only short term solution India has for cheap & abundant power. Hydel too suffers from long lead times & environmental issues. Renewable energy may work out for India but only in the future when the costs are lower & technologies more mature. So stop praising MMS & his bunch of monkeys. They are no good for India and the nuke deal is nothing but a thinly veiled attempt by MMS to sellout our strategic nuke programme.

Millions 'left behind' in rural China

"Foreign companies come here, employ cheap labour and get all the money," says Chen Fu, a migrant worker who is back to visit his mother.

"It's not something we have any control over. It's our system."

"Foreign companies can exploit us, but many Chinese don't realise what's happening," says Mr Chen.

"They are being fooled by officials in China who have strong connections with foreign companies."

According to World Bank figures, nearly 500 million Chinese people still live on less than $2 (£1.40) a day. The rural poor feel that the profits from China's economic expansion have passed them by.

One of the problems for China's rulers is that they are seen as legitimate only when they deliver economic benefits. {Remember annual-rainfall analogy in my earlier post ?}

The influential economist Yang Yao recently wrote that the Communist Party's model of growth could soon collapse unless it allows China's 800 million rural people more of a say

He argues that the money eaten up by China's most impressive new projects might be better spent on welfare for the poor.

Ask Prof Yao about China's prestigious airports and showcase modern highways, and he is not impressed.

"This kind of investment benefits corporations disproportionately more than ordinary people," he says.

"But if you allow people more say in government decisions, then China's growth can be distributed more equally." {Dont worry Mr. Yao, we at BRF are with you }

He is critical of Shanghai's Maglev train system, a super-fast monorail from the airport to the city which came with a hefty price tag.

"Basically that's a big toy," he says. "Each day it's losing money." {This goes against what our Chinese friends (who were probably given special access to BRF from China) have been saying. May be he's sour grapes onlee ? }

If people could chose, he thinks they would direct the money to the public good, like improving water supplies.

"Although China has grown so fast," he points out, "we still have 200 million people who don't have access to safe water."

New welfare policies could head off some of the discontent in China's countryside. But there is no plan yet to give rural people a direct voice.

derkonig wrote:^^^^
very simple and obvious fact that India needs a lot of cheap power and for that nuke power is a total misfit just like MMS is for his gaddi. India will go nowhere if power doesn't come cheap. .

Cheap & power are oxymorons. Power is not "free" and there is an economic cost to produce it. Anyways, "cheap" power will lead to huge distortions , abuse and misuse and total inefficiencies like the Chinese do or the even more grotesque misuse such as in Dubai (the average resident in Dubai has a carbon footprint that is nearly three times an AMIRKHAN"S , there has to be some way you can pay for all those chilled swimming pools, those indoor ski slopes and wave making pools and fresh water in the middle of a blazing desert) .

Power can only be cheap when you dont account for the "free" inputs like carbon emissions, alternate land use, dislocation and everything. Dubai is a desert , has lots of cheap energy (gas ) , while China can clear out land by the stroke of a pen and strip mine huge land areas and sustain that wasteful and inefficient use.

We cannot do that in India. The only way out is efficiency and tapping non coal/non hydel sources. We need to get our act together on Nukes. That is the only sustainable way out for base load power. Some 20 ultra mega nukes of some 5000 MW each should do the trick to supply to the cities and metro areas with adequate back up and power quality. The cheaper "fossil" fueled /coal/hydel etc with historically depreciated costs can be used for cheaper /subsidized power for rural and power areas and maybe for agricultural pumpsets.

There is no case to subsidize the rich and urban/metro India. They should pay the full cost of future power and there is no escaping a 2 tier power structure. Similarly you should have a two tier cost structure as well , with the bulk of future metro/city demand being met by nukes and rural/ agri (limited power subsidized) from legacy plants/fossil fuels.

We should not kid ourselves. We have a lot more in common with Japan, South Korea and France . Limited natural resources . And like them Nukes should generate the bulk of our power . If Japan, S. Korea and France with 'expensive' nuke power are 1st world countries and strong exporting economies, why cant we be one as well ?. Remember, S. Korea in the mid 70s and early 80s, is where India is probably today.

China will do much better than most people imagine because their domestic consumption is growing now much faster than its exports. This will offset the lack of export trade with say the U.S. The population of China in the middle class is growing and will continue to grow for the next decade. This next decade however for the U.S. and Canada will be bad as the baby boomer's demographics will cause a major slow-down in consumer spending which makes up 2/3 of the economy.
Check out http://www.hsdent.com for how population demographics affect the stock market.

Shanghai's property bubble

http://www.youtube.com/watch?v=QXNLFlbrlg8

China's poverty gap close to 'red line'

The gap between the rich and poor among the areas, industries and groups in China is escalating and the Gini index of the country now exceeds the "red line". These series of problems brought by the escalating poverty gap have drawn concern from the public.

Chang Xiuze, an expert at the Academy of Macroeconomic Research (AMR) of the National Development and Reform Commission (NDRC), said that according to the figures from the World Bank, China's Gini Index reaches 0.47.

Note: A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality.

Acharya,

This is not entirely accurate.

There have been many many reports on why the Chinese can never turn into consumers.

First their demographic dividend will be dropping in about 5-10 years as they go from a young society to an old one without getting rich first. Look at the chart I posted in this thread earlier.

Second they have no social net. This means people save all their money for retirement. In any case personal savings is only 15% of the GDP. Compare with India where personal savings is about 22%-24%.

The developed countries already have an enormous amount of savings amongst the older population. One recent estimate showed something like $15 Trillion sitting in bank acounts and bonds as they pulled out of the markets. They also have enormous property and stock holdings and can gradually sell this off to support their consumption. Also despite recent hiccups the developed nationS social safety nets are still very strong.

The Chinese have also plucked all the low hanging fruit already. To make the transition into a developed economy they need to have atleast 30% of their population be college level educated. This population has already been born and yet is no where near this level of technical ability and will never be.

It is not hard to know where this Ponzi scheme will end. As posted earlier this is easily one of the most resource inefficient societies ever built. Every year they need to invest an exponentially larger amount of money to produce the same amount of growth. Last year alone they invest $1.4 trillion. This year they need to invest $1.8 Trillion. And so on.

Right now the Chinese government projection is for 6 Billion tonnes of coal a year in 2015.

Compare that to India, where despite our deprivation we have managed to stay in touch in terms of growth.

For instance our coal consumption is 400 million ton per annum. This is 1/10th the Chinese output yet is enough for us to produce 1/4 the electricity China produces. We also produce 1/3 the steel China produces.

Out of necessity we have the unique opportunity to be the most resource efficient society on the planet.

I think there must be a middle ground between being vastly inefficient as China is, and as sparing with energy use as India is now. We will be retarding our own growth if we insist on keeping energy expensive while we climb up the development ladder. Indians need access to reliable, 24x7 power at affordable rates. That cannot be compromised for environmental principles.

There is nothing clever or green about being chronically power deficient, while at the same time paying some of the highest rates in the world for electricity.

Abhijeet wrote:... Indians need access to reliable, 24x7 power at affordable rates. That cannot be compromised for environmental principles.

There is nothing clever or green about being chronically power deficient, while at the same time paying some of the highest rates in the world for electricity.

Don't disagree.

But the biggest problem in India is not 'environmental principles'.

The real problem is we don't have an organized plan to get at all that coal sitting under much of India.

So every project turns into a piece meal problem, vulnerable to being picked off by overwhelming opposition.

Also we are still increasing generation at 25,000 - 30,000 MW per 5 year plan. We have over 160,000 MW of generation capacity. Yet only about half this power is metered and paid for.

This is why your rates are so high while being of such poor quality. More generation will only make this worse.

In any case this is the China thread, and I just wanted point out reality to some China worshippers on this forum.

Theo_Fidel wrote:
For instance our coal consumption is 400 million ton per annum. This is 1/10th the Chinese output yet is enough for us to produce 1/4 the electricity China produces. We also produce 1/3 the steel China produces.

What if you find out that most of the out of coal and other raw commodities in CHina are being hoarded and they trade secretly these commodities with some other third country such as US.

@Vina,
sir please compare the cost of power generation from a coal based plant and that from a nuke plant. The answer is obvious, India has to stick to coal. No nukes for us. At 3% of our capacity, nuke power shud be the last thing on our mind. It would be good if we can come up with some large solar farms in Thar/Guj (I guess some work is happening there already), besides, GoI plans all govt. buildings to have solar power generators by 2020. So if we have to absolutely throw our money towards some expensive options, solar/wind will be good, not nukes. Besides, pl. remember our nuke fuel will be imported and therefore in some ways nuke fuel will be just like crude i.e. it puts us at the mercy of the suppliers and only hampers our plans for energy security. But then again, all of this is way beyond what PhD. holder MMS can comprehend.

http://www.telegraph.co.uk/finance/chin ... -OECD.html


the paris based OECD opines that the chinese boom may be running out of steam:

The OECD said the CLI for China has dropped from 102.7 points at the turn of the year to 102.2 in March. The fall is significant, since the indicator is regarded as a reliable bellwether for turning points, and has a reliable record of forewarning the peaks and troughs for leading economies in recent years. It came as the People's Bank of China released a report saying that it would improve the technical mechanism of the yuan's peg to the US dollar.

Acharya wrote:

Theo_Fidel wrote:
For instance our coal consumption is 400 million ton per annum. This is 1/10th the Chinese output yet is enough for us to produce 1/4 the electricity China produces. We also produce 1/3 the steel China produces.

What if you find out that most of the out of coal and other raw commodities in CHina are being hoarded and they trade secretly these commodities with some other third country such as US.

I too have the same doubt. Can a country consume coal to such obscene levels and operate with such inefficiency? This can't go on for long unless others are being fooled.

Coal will be used not only for generating electricity but also used an industrial fuel in various manufacturing processes. It will also be used for heating homes during winters. So the inefficiency is not as bad as it is portrayed.

Coal will be used not only for generating electricity but also used an industrial fuel in various manufacturing processes. It will also be used for heating homes during winters. So the inefficiency is not as bad as it is portrayed

No. The Chinese economy is amazingly and terribly wasteful in terms of energy and resource usage. Compare the Japanese economy with that of the Chinese economy (roughly equal in size as of today) and China consumes many orders of magnitude more energy than Japan!.

Yeah. Something in the numbers is not right. Either China is not actually mining the amount of coal it says it is, or the Economy numbers or wrong or the answer is it is simply so wasteful.

Sure, some numbers should be wrong.

Compared with Japan,

China consumes 5 times of steel, 4 times of cars, 3 times of electricity, 2.5 times of foreign trade.

and the Chinese government revenue is twice of the Japanese.

In 2008 alone, China added expressway longer than the total Japanese expressway network. In 2009 alone, China added high speed railroad longer than the total Shinkansen network.

Then Chinese government stated that its GDP is a little bit less than Japan.

And all the dear Indian friends on this forum jumped out,

"The Chinese government overestimated its GDP!".

vina wrote:

Coal will be used not only for generating electricity but also used an industrial fuel in various manufacturing processes. It will also be used for heating homes during winters. So the inefficiency is not as bad as it is portrayed

No. The Chinese economy is amazingly and terribly wasteful in terms of energy and resource usage. Compare the Japanese economy with that of the Chinese economy (roughly equal in size as of today) and China consumes many orders of magnitude more energy than Japan!.

Yeah. Something in the numbers is not right. Either China is not actually mining the amount of coal it says it is, or the Economy numbers or wrong or the answer is it is simply so wasteful.

Compared with Japan,

China consumes 5 times of steel, 4 times of cars, 3 times of electricity, 2.5 times of foreign trade.

and the Chinese government revenue is twice of the Japanese.

In 2008 alone, China added expressway longer than the total Japanese expressway network. In 2009 alone, China added high speed railroad longer than the total Shinkansen network

When you say (by the Chinese govt's own published figures) that the Chinese GDP is roughly equal to that of Japan, it means , the economic output of all the things that you mentioned above (including Shinkashen network, consuming 5 times more steel etc..2.5 times more electricity, ) done by China is the same as the economic value of what Japan is doing in it's own economy!.

However in that process of producing the same output of Japan , you consumed orders of magnitude more energy. And that is what "Energy Intensity" means (google for it) and the higher the energy intensity, the more wasteful you are.

But think of it. Some of those things you mentioned like infrastructure building are done. You cant keep building "total railroad longer than Shinkashen" every year!. There is a natural limit to it. And that is exactly why I am confident in betting that China's growth rate has peaked and that the avg next 5 years, India's growth rate will be higher. I am willing to bet. Are you ?

vina wrote: ... (google for it) ...

You mean "baidu for it", don't you?

Sorry, couldn't resist, had to post this one liner.

http://www.businessweek.com/magazine/co ... 091633.htm
Why Factories Are Leaving China
A labor shortage is trimming margins for exporters, who are moving to Vietnam, India, and elsewhere

In Guangdong, the mainland's top exporting province, wages have almost doubled in the past three years, and more than half the factories can't find enough workers. The number of migrants who traveled to coastal provinces for work fell by 9 percent last year, to 91 million. "This lack of labor will only get worse," says Willy Lin, chairman of the Textile Council of Hong Kong, a trade association.
Factory owners complain that the higher wages are devastating profits, especially as their customers continue to squeeze them for lower prices. "Wal-Mart won't raise what they pay us," says Poh-Heng Toh, general manager of teddy bear producer Lovely Creations. Another Wal-Mart supplier, jewelry maker Profit Grand, has cut its staff to 450 from 600 largely because it can't find workers at the rates it's willing to pay, says Chairman Hsu Chi Lin. Wages, Hsu says, have risen from 2 percent of total costs a decade ago to 12 percent today, while net margins have fallen from 15 percent to about 8 percent. Factory owners are also worried about a potential revaluation of China's currency. The yuan is up 21 percent vs. the dollar since 2005, and many economists expect it to rise an additional 5 percent this year.

IMHO, if this talk of China is bubble is real, there could another slowdown in the world economy which noone wants.


China’s bubble waiting to burst

http://business.timesonline.co.uk/tol/b ... 127675.ece

Marc Faber, the bearish investor who peddles boom, doom and gloom in his reports, believes China could crash within 12 months as falling prices in stock and commodity markets indicate that a property bubble is about to burst.

“It is the greatest bubble in history with the most massive misallocation of wealth,” said James Rickards, formerly of hedge fund Long Term Capital Management. He told a business summit in Hong Kong that stock market speculation on credit and wasteful spending by officials were disasters waiting to happen.

Rickards even said it is time to take China and Russia out of the investment-fashionable Brics grouping — coined by Jim O’Neill of Goldman Sachs — because only Brazil and India are what he called “real economies”.

Rogoff said bursting the Chinese debt bubble would cause a recession throughout Asia in the next 10 years and Chanos warned that China was addicted to property development as a growth and revenue driver.

Andy Xie, an independent economist in Shanghai who is closer to the market, said powerful interest groups have paralysed economic policy, and local governments survive financially by inflating the price of land — all of which they own.

vina wrote:

Compared with Japan,

China consumes 5 times of steel, 4 times of cars, 3 times of electricity, 2.5 times of foreign trade.

and the Chinese government revenue is twice of the Japanese.

In 2008 alone, China added expressway longer than the total Japanese expressway network. In 2009 alone, China added high speed railroad longer than the total Shinkansen network

When you say (by the Chinese govt's own published figures) that the Chinese GDP is roughly equal to that of Japan, it means , the economic output of all the things that you mentioned above (including Shinkashen network, consuming 5 times more steel etc..2.5 times more electricity, ) done by China is the same as the economic value of what Japan is doing in it's own economy!.

However in that process of producing the same output of Japan , you consumed orders of magnitude more energy. And that is what "Energy Intensity" means (google for it) and the higher the energy intensity, the more wasteful you are.

It makes sense to me. Japan produces less number of high valued items. China produces more number of low valued items. Imagine this: Lets say Japan can make 1 car for $10000. Lets say China can make 10 spoons for $1. So for $10000 investment, China produces 100,000 spoons. Needless to say that it consumes lot more energy to produce 100,000 spoons than 1 car.

I dont quite agree with the "inefficient" theory. If China was inefficient on a micro level, then it will affect the pricing of the goods. So, I believe there must be some optimizations done to make best of use of whatever setup they have. (I'm imagining "inefficiency" as trucks loaded with coal, spilling all the way till they reach the plant... )

Hmm. Chinese wanted to "de-risk" from USD and piled on to the Euro. Now that the Euro has cratered, I wonder how the faces of those who are managing their $2T reserves are like.

All in all, Chinese sweat and labor and are denied consumption to build reserves and the Chinese babus go and squander that in USD and EURO reserves which have evaporated in value.. Poooooofff

naren wrote: So, I believe there must be some optimizations done to make best of use of whatever setup they have. (I'm imagining "inefficiency" as trucks loaded with coal, spilling all the way till they reach the plant... )

Boss if you want to understand the optimization done in China vis a vis Japan, just compare the average working conditions of, say a semi-skilled factory worker in the two countries.

Take into consideration things like real wages, medical and social benefits, time off etc. That's where the optimization, as you put it, is happening.

Ask a person to work 4 times as hard and long and in atrocious conditions and pay him 2 times as much as he is making now. What you get from your customers is 3 times in terms of wages. That is what China is doing in essence. The 1x differential is what the state keeps and invests in USTs or in domestic infrastructure. Its a win win situation. The people get richer, the country gets modernized. So long as the marginal cost of production is below your marginal sales price per unit, efficiency be dammned. Fixed asset investment especially in infrastructure is used to modernize the country but also to keep GDP growth rates on publicized trajectories (hence the USD 600B stimulus last year). What happens when capacity growth is so out of whack with current consumption that there is a loan servicing crisis? Simple... in China the average citizen has no rights. His savings will be expropriated to cancel the asset side of the balance sheet i.e. the loans which have made the modern infrastructure possible.

Net, net, what the Chinese are doing is transforming a country of 1 billion plus people in one lifetime from a poor agricultural society to an industrialized society. The cost paid for this could be the life savings of this entire generation of Chinese if the assets built cannot repay the loans generated from the savings of the Chinese people. IMO they are only about halfway through the process right now. With the global financial markets being in the condition that they are at now it is interesting times ahead for China.

Quick.. What is common between Greece, Cyprus and China ?

Ans : Those are the top 3 worst performing stock markets as of now. China is 3rd after Greece. The Chinese market has tanked more than 20% from it's peak and is in technically a bear market!.

China survived the US meltdown by "stimulus", if Europe goes under, I think China is toast. But clearly, the European spending from the southern "Club Med" has to contract and real incomes fall by 15 to 20% (Spain, Portugal, Italy, Greece) and France and Germany are going to lower the boom down on the flood of cheap chinese "expolts" .

Interesting times ahead for the Chinese.

Beijing is no Dubai
http://www.theage.com.au/business/beiji ... -v9g1.html

So is this the Jim Chanos moment where China's ''treadmill to hell'' reaches its destination? Is China ''Dubai times 1000'', as the hedge fund manager claimed?

Hardly. Beijing, Shanghai and Shenzhen - where real estate excitement has been most frenetic - only account for 8 per cent of Chinese residential construction, according to UBS. Household debt is rising fast but remains minuscule when compared with Australia. Chinese incomes continue to outpace the rise in house prices.

Analysts outside China had massively underestimated the power of the Chinese state to command the economy back to life. They learnt that the Chinese Communist Party has more resources and more macro-economic policy credibility than any other institution on the planet - at least when it devotes itself to a clear and simple goal.

Yesterday when I posted this:

So long as the marginal cost of production is below your marginal sales price per unit, efficiency be dammned.

I was not aware that Hugh Hendry has said something similar in February i.e. that the Chinese goal is national power via GDP growth and not profit. Today Zerohedge has reproduced that quote alongwith Hendry's latest positions on the Chinese economy. He is putting his money where his mouth is:

Hugh Hendry sees 1920s Japan-Like Crash in China

Hugh Hendry, whose previous appearances have been well-logged by Zero Hedge, and who is currently raking the money thanks to long Treasury bet and his EURUSD short from when the pair was 20% higher, has never been a fan of China, and almost got into a fight with Marc Faber recently discussing the country's future prospects. In fact, Hendry uttered this memorable soundbite back in February, in which he mopped the floor with Goldman permabull Jim "BRIC" O'Neill: "I love Jim O'Neill. I love that Goldman Sachs guy. He says you either get it, or you don't. I don't get it. In the future there will be a Confucius saying: the wise man not invest in overcapacity. The flaw of the business model, at the center of it is a craving for power as opposed to profit." BusinessWeek reports that Hendry has now officially put his money where his mouth is and has bought puts on 20 companies that will profit from “a dramatic collapse” of China’s growth. With the Chinese stock market approaching 52 week lows, will Ecclectica soon become the next Paulson & Co. hedge fund iteration, even as the latter continues (allegedly) to bet on a US recovery, and thus stands to lose tens of billions if the thesis does not play out (although we are fairly confident Paulson's long stock positions are matched by even longer CDS hedges... but without additional data, we can never be sure)

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amit wrote:

naren wrote: So, I believe there must be some optimizations done to make best of use of whatever setup they have. (I'm imagining "inefficiency" as trucks loaded with coal, spilling all the way till they reach the plant... )

Boss if you want to understand the optimization done in China vis a vis Japan, just compare the average working conditions of, say a semi-skilled factory worker in the two countries.

Take into consideration things like real wages, medical and social benefits, time off etc. That's where the optimization, as you put it, is happening.

Agreed, but why does it have to be zero sum ? Commies being the "pr1cks with sticks" ((C) - narenullah ) they are, would sure optimize the power sector with their current setup. If not, the damages incurred would directly come out of their pockets.

As a general rule, most developing countries tend to optimize. (Imagine Dharavi). If there's one huge wasteful country, it is the Untidy Estates of Ummahrica.

http://www.theoildrum.com/node/4162

A Pretty Stunning Graph of World Cement Production (and China is Certainly Using It)

Also interesting is the percentage of the world's production of cement that China took up in 2007 (50%) compared to 2004 (42.5%); some of this can no doubt be due to preparation for the Olympics, but that surely cannot not be all of that growth can it? Also note that other countries (perhaps the "developing world?") seems to be using less of the total proportion of cement used.

Note that again China is consuming more cement than the rest of the world put together.

Also note that this is a little dated.

China is consuming a incredible 7 times over the #2 producer India.

Remember, in China, oil isn't used in cement production. In the "clinker" stage, it's all coal. In the blending stage it's electricity (which is generated 80% from coal in China).

And cement production in China is inefficient. There are hundreds of small plants, both wet and dry processes, and the local environmental impact is severe.

For those seduced by the numbers that China is an efficient society.... What can I say...

China was exporting a lot of dry walls for real estate construction world wide.