Real Estate Music Video

I heard an interesting piece on Public Radio International's The World this evening about young people's frustrations with China's real estate market. You can listen to the story here. The story is a bit sensationalistic - the comments of people wanting blood and to go out with a bang and Andy Xie's comments - but I still appreciated it.

Here is the music video that is discussed in the radio piece (it's in Chinese):



This music video reminds me a lot of the show I reviewed a couple months ago - 蜗居 - although this video is significantly more blunt.

I've talked many times over the past couple years about China's real estate market. I've been much gloomier about it in the past than I am now. Prices are still outrageous in big cities like Beijing, Shanghai, and Shenzhen, but things appear to be calming down a bit. And in places like my old home Xi'an, prices aren't that insane (relatively speaking).

Things are still out-of-whack and will continue to be so throughout much of the country even if prices don't go higher. I think there is a lot of truth to the messages of 蜗居 and this music video. The masses cannot afford housing in many urban centers and rich people are buying multiple apartments and leaving some empty. This is very tough for young men wanting to marry (owning an apartment is a prerequisite for marriage), for couples wanting to settle down, and scores of other people.

But I'm becoming convinced that things will cool down and that a popped real estate market isn't going to mean the same thing to China as it has to the US. China's economy is still going to be strong, the country will continue to grow, and people's lives will continue to improve even if real estate is no longer seen as a hot speculative investment. I'm beginning to agree with what author Zachary Karabell told me last year, "a popped real estate bubble in China isn't going to be derailing."

Not Enough Workers

You'd think that with all the people in China, there'd an endless supply of labor. There's not.

From The New York Times:

GUANGZHOU, China — Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage.

As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.

Factory wages have risen as much as 20 percent in recent months.

Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.

The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.

But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.

Read On

It's astounding that there are labor shortage this year whereas last year after the Chinese New Year there were as many as twenty million migrants without work. China's economy is incredibly nimble and fluid.

China's response to the economic crisis has, if nothing else, kept its wheels spinning. Their response is probably creating housing bubbles, over-developing commercial real-estate, and causing a number of other unforeseen issues, but they're at least doing something. I hate to go all Thomas Friedman and espouse the virtues of one-party rule, but China is not experiencing the gridlock that the polarized US is. And during these turbulent economic times, that is worth a lot.

The work shortages highlighted in the article above relate back to the post I made a few days ago. China's economy is no longer so coastal-focused. The opportunities for migrants used to be largely centered in cities like Shenzhen, Guangzhou, Shanghai, and other boom towns along the coast. More and more though, there are increasing opportunities on the interior of the country.

With low-level employees having more power and money, this article states that inflation and higher prices of goods are possible. Whatever the macro-economic hiccups could be, I see migrants having more choice and opportunity in their work as a good thing. The migrants of China perform back-breaking, monotonous labor far, far away from their home towns for very little money. I'm all for them having the chance to make a little more money, have, possibly, better working conditions, and live better lives.

A New Shanghai Apartment: 68% More Expensive Now Than a Year Ago

I heard a rather disturbing story on NPR's Morning Edition while in the shower this morning.

Here is an excerpt of the transcript from National Public Radio (note, the radio version can be heard here):

New figures show that property sales in China jumped 75 percent last year as record levels of bank loans boosted purchases. Property prices rose by the fastest pace in 18 months in December, adding to fears of a real estate bubble. China has been trying to rein in speculation.

One of the places with the fastest rise in prices is Shanghai. A new Shanghai apartment now costs 68 percent more than it did a year ago, according to Knight Frank, a commercial and residential property agency.

In many other Chinese cities, prices rose by 40 percent, the agency says. Now, ordinary people fear they are being priced out of the market, while the luxury sector is soaring.

"Last year, one of my customers arrived in a BMW, lugging two suitcases. Each suitcase contained the equivalent of about $70,000. He said, 'I've brought this money to buy a villa,' " recalls James Zhuo, a property agent for Century 21 who works in Lujiazui, one of Shanghai's most expensive areas.

The coal-mine millionaire from the inland province of Shaanxi was the type of customer who was buying in 2009, Zhuo says.

Read On

68% in one year?! Even (the relatively modest) 40% thoughout the rest of China is insanity. This kind of rapid growth even puts the early 2000's US bubble to shame.

This article does a good job in highlighting how Chinese cities are already absorbing a massive amount of people flowing in from the Chinese countryside. That migration will surely raise demand for apartments in Chinese cities. That is an unprecedentedly large amount of people who'll be coming into the Chinese real estate market in the coming decades.

While saying that, so much of the growth highlighted in the article appears to be fueled by luxury apartment growth. Obviously, rural migrants aren't going to be adding to demand for those kinds of apartments.

To me, any investment or commodity or anything that grows 68% or 40% (or even an amount significantly less than these numbers) is shaky. It screams ponzi scheme or some other kind of predatory sucker operation.

And usually, those kinds of schemes end up doing something like this:

Photo from shanghaiexpat.com

The above photo is of a collapsed apartment building under construction in Shanghai this past summer.

I really want China to avoid anything remotely close to what is going on in the US. Sure, Chinese people alive today have seen things much, much worse than anything going on in America right now. But things here in the US are bad. While things are going well for Qian and me on a personal level, the US as a whole is very sick. I hope China can learn from our mistakes.

Frontline: OTC Derivatives

I love the PBS show Frontline. The program always does great reporting.

The feature from this week that I'm embedding here on financial derivatives is both startling and upsetting. It runs about an hour.



Unfortunately, it doesn't appear that the US has learned its lesson.

Another Economics Post

China's had two very strong quarters of growth.

From The Wall St. Journal:

BEIJING—China's recovery is becoming broader and potentially more sustainable, a shift that could provide better support for a still-fragile global economy. Reinforcing those signs is a change of tone from China's cautious government, which is now becoming more confident in a solid rebound.

Economic data released Thursday showed China's gross domestic product growing by 8.9% from a year earlier in the third quarter, following the 7.9% gain in the second quarter. The expansion in industrial output, the backbone of the manufacturing-heavy economy, accelerated further to 13.9% in September from 12.3% in August.

Just as important is evidence that improvements in the economy are achieving a momentum that's no longer totally dependent on the government's massive stimulus program. The key shift in the latest quarter: a turnaround in the financial health of Chinese companies.

"Orders are piling up on our end. Now my headache is how to get our production to catch up," said Su Qisen, vice president of Xiangxing Bag & Luggage Group, located in southeastern Fujian province. Export orders started to rebound around June, he said, but Chinese consumers are also proving more willing to spend on the company's purses, suitcases and backpacks. "The domestic sales are doing especially well, especially our own brand," Mr. Su said.

He plans to hire 4,000 to 5,000 more employees in the next few months to work on 10 new assembly lines, up from around 10,000 workers now. To attract workers in an increasingly competitive labor market, Mr. Su said he is also planning to raise wages by 10% to 15%.

Read On

Things are looking up for China. The article goes on to say that the increased lending that fueled China's growth earlier this year have slowed. But some are still worried that even the slowed rate is not something that can be continued for the long term.

From The Financial Times:

China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy.

“Monetary policy must not neglect asset-price movements,” he writes. “Therefore it is urgent that China shifts from a loose monetary policy stance to a neutral one.”

Mr Qin’s unusually frank warning comes ahead of the publication on Thursday of third-quarter gross domestic product figures that are expected to underline the rapid recovery in China’s economy, with analysts forecasting growth of nearly 9 per cent compared to last year.

...

“This is the first thing you would expect the authorities to say before they begin to moderate policy,” said Stephen Green, economist at Standard Chartered in Shanghai. But any increases in interest rates or controls on lending were unlikely before Chinese New Year in February, he said.

Read On

China's response to the financial crisis has fascinated me. Is it all going to work? Is China going to continue to grow while much of the Western world deleverages/stagnates? Is China going to pull the world up with it? Is China going to be pulled down by the West?

At this point, I have no idea.

A Nation of Spenders

Can the world economy count on China to open up its pockets as Americans are closing theirs?

From The Washington Post:

Image from mamondo.com

BEIJING -- Chen Zizheng wheeled his shopping cart down one of the aisles at the Carrefour store near his house and paused in front of the bottles of Remy Martin, Johnnie Walker and Hennessy, each selling for an amount about equal to the annual salary he earned when he was a young government employee.

But those days were about 30 years ago, around the time Deng Xiaoping launched China on a path of economic reform and opening up. Now China's thriving economy has made it possible for people like Chen, a 67-year-old semi-retired aerospace industry official, to plop down 1,168 yuan, or $170, for a bottle of liquor at a branch of a French "hypermarket" chain.

"It's not that expensive for ordinary Chinese people now," he said, adding that he planned to serve Johnnie Walker Green Label to guests he was expecting to share moon cakes with during last weekend's mid-autumn festival.

"As Chinese society has developed and opened up, people have a better appreciation of imported liquor," said Chen, who used to buy the traditional Chinese stiff drink known as maotai. "When you choose a gift, other people will look at it and if it is brand stuff they will feel respected because you chose it for them."

One year after the global economy went into a tailspin, many economists are wondering whether Chinese consumers, once a thrifty lot, will lead the world out of the recession. Last week, the International Monetary Fund said China would do just that, thanks in part to the government's $600 billion stimulus package and a flood of bank lending. The IMF increased its forecast of Chinese growth to 8.5 percent in 2009 while lowering its forecast for the U.S. economy, which it said would shrink 2.7 percent.

Read On

Chinese people, on the whole, are frugal. But their attitudes are changing. Especially when it comes to people living in cities who are getting rich.

Whether its Buicks or Louis Vuitton or Chivas Regal, Chinese people are quickly developing tastes for material goods. Any idea that China's history with communism took away the passion for these kinds of goods is dead wrong. China is a country full of new rich people. Just like in all countries in the world, people who have money for the first time in their lives like spending it.

I heard a lot of mockery about China's 60th anniversary on media reports this week in America. I suppose the mockery is deserved in a lot of ways. But westerners would be wise to look past this past week's homage to communism because it was just a big show.

China is becoming a blatantly materialist society and is more and more comfortable spending money. It'll take years. But I expect Chinese people to be making up for Americans' (much-needed) belt tightening before too long.

US Losing Luster

When it comes to the question of which country the rest of the world would rather be with - the US or China - the choice is not as easy as it used to be.

From Korea's Chosun Ilbo:

Image from china-briefing.com

The American "hegemony" is receding, leading economist Jeffrey Sachs said Tuesday in an article for the Financial Times on the G20 Summit held in Pittsburgh. The article was titled "America has passed on the baton." In mid-September, 16 U.S. intelligence agencies released a document which pointed to Beijing as one of Washington's main global challengers in the future. All this shows that the U.S. is on the ebb in the 21st century, while China's international standing and influence are rising rapidly.

Since the Sept. 11, 2001 attacks, the U.S. has concentrated foreign policy attention on the Middle East, which it pointed to as the source of terrorism, but has paid less attention to Asia, Africa and Latin America. By contrast, China has been expanding its influence and raising its profile in those areas.

Citing Asia as an example, Newsweek said Asian nations are being asked to decide where they stand between the U.S. and China, as these two powers are building their respective alliances and engaging in fierce competition. All this was sparked by two military exercises staged in Asia in 2007. One was Malabar 07, an exercise initiated by the U.S. and joined by Australia, India, Japan, and Singapore. The other was the Peace Mission 07 under China's initiative and joined by members of the Shanghai Cooperation Organization such as Russia, Kazakhstan and Uzbekistan.

The SCO is a group formed by Beijing and Moscow in 2001 ostensibly dedicated to combating terrorism. With the exercise as momentum, weaker Southeast Asian nations such as Burma and Cambodia as well as Central Asian countries came under China's influence, experts say.

Read On

"Either you're with us or you're against us."

That doesn't have quite the same bite after Bush and his administration took their eye off the ball (China) and focused solely on "killing the terrorists" during their reign. Thanks for being such a visionary leader, President Bush.

The move away from China towards America isn't solely limited to alliances and political support. Businesses across the globe are lining up with China too.

From AFP:

ISTANBUL — The nascent global recovery is dividing Latin America between economies that pay the price for ties with the United States and those that benefit from growing links with Asia, experts said.

"The US economy is getting better, but with a lot of uncertainty along the road," Nicolas Eyzaguirre, the International Monetary Fund's Latin American director, said at a conference Friday in Istanbul.

"The effect on Latin America will be very different depending on what's your level of policy preparedness and what's your linkage with the US and vis-a-vis Asia," he said.

In its economic forecasts published Thursday, the IMF said that Latin America had begun to recover from the global economic crisis and would post growth of 2.9 percent in 2010.

But there were wide disparities, with countries such as Mexico, which depends heavily on the United States, losing out and others like Brazil benefiting from rising exports to China.

The United States is the epicentre of the crisis, while China is leading global growth.

...

Goldfajn, a former deputy governor Brazil's central bank, said Brazil used to export mostly to the United States, but "China is overcoming exactly now the US as our main export destination" for the first time in the country's history.

The economist said that generally the region's economic health depends on the degree of economic links to the United States, saying Colombia, Brazil or Argentina were at a safer distance.

Read On

The awarding of the 2016 Summer Olympics to Rio was a substantial repudiation against the US. The rest of the world is not in awe of the US' greatness any more. It's gotten so bad that Obama's visit and impassioned plea to the IOC was rewarded with being the first site to be eliminated. I understand that there were a lot of politics not related to Obama behind the decision, but there's no doubt that Chicago being eliminated first was a substantial, symbolic slap in the face.

America is way off of where it was even a decade ago. It's hard to see how or when it will get back to where it once was.

China is on the rise and is going to continue to be a yin to America's yang.

Recovered

I commented on a post at the excellent The Peking Duck Blog last night. In the post, Richard, the author, was lamenting coming back to America at this time when the Chinese economy has, as The New York Times reports, "recovered." He too just left China after living there for an extended period of time.

I wrote a similar post myself last month. Indeed, leaving China for America right now feels weird. America is reeling and has been for some time now. While at the same time, there is still excitement and optimism living in China.

As I've been ranting about for months, I just don't see how the reckless lending, being promoted by the government, that's been producing China's growth, is a good thing though. To me, it's all a big mirage. China is keeping itself afloat by bubble-blowing and doing the same things that got the west into trouble. How can that be lauded?!

China's bank lending was addressed in the NY Times "recovery" article Richard referenced over at the Peking Duck.

From the end of the article:

Chinese banks came into the crisis with enormous excess reserves, the result of three years of tight regulatory limits on lending to prevent the economy from overheating. When those limits were removed, and authorities urged bank executives to lend, the total value of loans outstanding shot up more in the first seven months of this year than in the previous 24 months.

...

As much as a third of the extra bank lending in China appears to have gone into real estate and stock market speculation. But the bulk has gone into investments by companies and local governments, with tangible results.

...

Still, China’s stimulus efforts could be sowing the seeds of future distress. With so much money washing into the system so fast, regulators have voiced concerns about corruption in government investment projects.

Cheap cash has a way of inflating bubbles — just ask Wall Street — that could damage China’s economy and its banks when they pop.

“You have to imagine the rigor and due diligence” that mainland banks have been showing in rushing out so many loans, said Benjamin Hung, the chief executive of the Hong Kong unit of Standard Chartered Bank.

But such concerns are so 2008.

Uh... OK...

Here's an article that I think addresses such concerns in a more, I think, adult tone.

From Reuters:

Image from The Wall St. Journal earlier this year

Risks in China's banking sector are growing as banks have pumped out large amounts of credit this year to help the economy, the top banking regulator said in comments published on Friday.

Chinese banks extended 8.15 trillion yuan ($1.2 trillion) in local currency loans in the first eight months, far exceeding the government target of 5 trillion yuan for the full-year 2009 set early this year. The sharpest rise came in the first six months.

'This year, as bank loans have increased rapidly, all kinds of risks in the banking industry are picking up,' Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said in a statement on the agency's website (www.cbrc.gov.cn).

It marked the most pointed recent warning from the banking regulator about increasing risks due to the explosive rise in lending

Read On

There's no doubt that this massive lending is what has China's economy clicking. Is China going to succumb to a similar crash as the US following this significantly increased lending? I don't know. Maybe it won't. But China really seems to be tempting fate by leveraging itself up in such staggering amounts of loans. The whole thing seems short-sighted to me.

The New York Times says that China has recovered. I can't say that I'm utterly convinced things are so clear-cut though.

Living in the Shadows

At the end of 2008 and in the first few months of 2009, I wrote a lot about the plight of Chinese migrants. There were a lot of media reports about the millions upon millions of migrant workers who were either struggling to find work in Chinese metropolises or who had simply returned to the countryside dejected.

I haven't seen too many reports about migrants in recent months. I have to assume that most of the millions struggling at the beginning of 2009 eventually found work. The last figure I saw said that there were (only...) four million still looking for work. So it appears as if the crisis of unemployed migrants from last winter is not too severe right now.

I got an email from someone at The Global Post the other day. They directed me to some recent reporting that they've done on Chinese migrant workers entitled: Living in the Shadows. I suggest you click that link and go check out what they've put up over there. The videos, in particular, give the viewer a fascinating glimpse into the daily struggle of those on the edge of China's growth.

Tires and Chickens

Is protectionism about to kick into higher gear?

BEIJING -- China indicated it would restrict U.S. imports of chicken and auto products and demanded trade talks after Washington's move to slap punitive sanctions on Chinese tire imports, raising tensions in ahead of two planned meetings between the countries' leaders.

Many observers in China say ties between the nations should remain unharmed, noting that China's measures could limit imports in two areas that it already tightly controls -- and thus might not have a huge effect on U.S. exports. But the measures add to worries about trade protectionism amid rising unemployment around the world.

Citing a jump in Chinese imports, the Obama administration said Friday it would impose stiff tariffs on Chinese-made tires for the next three years, invoking a section of trade law that China agreed to as a condition for its joining the World Trade Organization in 2001. The move essentially would cut off the source of nearly 17% of all tires sold in the U.S. last year and hit cost-conscious consumers particularly hard, as retailers will have to find alternative sources for the lower-end tires that make up much of what China sends to the U.S.

Beijing responded quickly. Sunday, its Ministry of Commerce said it was starting antidumping procedures against U.S. exporters into China of chicken and auto products. It said it had received complaints from local producers that the U.S. products were being dumped in China at below-market prices. The ministry denied that the move, which could lead to sanctions, was protectionist.

"China has consistently opposed trade protectionism, and the country's actions since the financial crisis have reflected this stance," the ministry said on its Web site. "China is willing to continue to act in accordance with countries around the world to push forward the world's economic recovery."

Read On

The end of the article quotes some observers and analysts who say that this spat isn't that big of a deal and is, in fact, inevitable given the state of the world economy. I can see where this point of view is coming from. It's understandable that US politicians are feeling pressure from unions and other groups dissatisfied with what is going on these days and feel like they have to act.

It'll be interesting to see whether this is a one off event (or just a series of small disagreements) or the beginning of a larger trade war.

I don't think it'd be wise for the US to try to ramp things up here. Sure, the economy sucks and there are a lot of people who'd love to see Chinese products blocked from entering the country. But I think that closing down free trade right now is going to make things much worse than they already are.

Personally, I'd rather not live through a reincarnation of Smoot-Hawley.

Saving Face at All Costs

China's stock market, which, until a couple weeks ago, had nearly doubled from early January, has run into some trouble.

From Bloomberg:

Chart from Bloomberg

China’s benchmark stock index, the world’s worst performer this month, may fall another 10 percent as bank lending slows, said Andy Xie, a former Morgan Stanley chief Asian economist.

“The current correction is reflecting the tightening in lending,” said Xie, who correctly predicted in April 2007 that China’s equities would tumble. “We’ve seen the peak of this market cycle, though there’s likely to be a bounce as the government seeks to stabilize the market.”

The benchmark Shanghai Composite Index plunged 5.8 percent yesterday, the most since Nov. 18, extending its decline from this year’s high on Aug. 4 to 17 percent. The gauge, the worst performer among 89 benchmark indexes tracked by Bloomberg worldwide, sank as foreign direct investment plunged and Yunnan Copper Industry Co. posted a loss, saying there are “no clear signs” of a recovery. The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, slumped 5 percent, the most since March 2.

Prime Minister Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package, coupled with record bank lending in the first six months, helped the Shanghai index more than double this year from the low on Nov. 4. An estimated 1.16 trillion yuan of loans were invested in the stock market in the first five months, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council, China’s Cabinet.

The equities rally faltered as new loans in July fell to less than a quarter of June’s level and the securities regulator allowed initial public offerings after a nine-month moratorium.

The government may order the national social security fund to support the market before Oct. 1, when the Communist Party celebrates the 60th anniversary of taking power, according to Xie. Other measures that may be taken include halting the approval of IPOs and share placements, he said.

“This is not the bursting of the bubble,” Xie, who is now an independent economist, said by telephone. “The government will be under pressure to take action because a lot of people have lost money.”

Read On

I'm not simply posting this because of the huge loss that was posted yesterday. For all I know, stock prices may be up today or by the end of the week. Reacting to every rise or fall of the Chinese stock market will probably not tell too descriptive of a story and will instead surely paint a very bi-polar picture.

The thing about this article that struck me were the comments from the analyst, Mr. Xie, about the upcoming anniversary in China and the need to have things "going well" when that day occurs.

Is the "government action" that Mr. Xie says is imminent the most prudent thing to do at this time? I suppose it depends upon what that action is. If it were regulations aimed at promoting stability in the markets and economy, then those could be a good thing. But if it is simply more cash aimed at propping up otherwise stalling and over-inflated markets, then I would think that that would be pretty harmful.

A few days ago, there was a discussion in the comments of one of my posts about the notion of "saving face" and how important and central to Chinese culture the concept is. Hopfrog, a frequent commenter, encapsulated the absurdity of doing things for the sake of saving face very well, I think:

I personally think if it weren't for this whole ingrained "save face" concept that the government would do the right thing and regulate their markets to prevent the crash, which I will guarantee, is imminent.

Saving face is without a doubt the most moronic ancient concept among any culture on the planet. Yeah, let's not be open and honest and try to improve... why would we do that when we can lie to ourselves and each and continue to make mistakes while maintaining a false pride based on lies?? BRILLLIANT!!!

I'm not a savvy investor and this stuff that drives how markets work is all new to me in the past year. But the idea that saving face would be the driving force behind government economic policy and particularly the intentional creation of a bubble is crazy to me.

If money is pumped into the Chinese markets so that October 1st is a grand day, I really hope that China has a glorious day that they remember forever. Because it'll certainly be an expensive one.

逆流而上

This morning, I asked Qian if there is a Chinese idiom for "swimming upstream." I don't know why, but this seems to me exactly the kind of phrase that the Chinese would have an idiom for. She gave me a four character phrase, but she said it isn't an idiom per se. The phrase is 逆流而上 (ni liu er shang).

The reason I asked about this kind of a phrase is because after reading an article about Americans coming to China for work the other day, I have the feeling that Qian and I are about to leave a relatively smooth and calm brook and are about to begin walking upstream in a substantially stronger, and possibly raging, river.

From The New York Times:

BEIJING — Shanghai and Beijing are becoming new lands of opportunity for recent American college graduates who face unemployment nearing double digits at home.

Even those with limited or no knowledge of Chinese are heeding the call. They are lured by China’s surging economy, the lower cost of living and a chance to bypass some of the dues-paying that is common to first jobs in the United States.

"I’ve seen a surge of young people coming to work in China over the last few years," said Jack Perkowski, founder of Asimco Technologies, one of the largest automotive parts companies in China.

"When I came over to China in 1994, that was the first wave of Americans coming to China,” he said. “These young people are part of this big second wave."

Read On

Over the past couple months, I've talked a number of times on this blog about my apprehension about returning to the States at this particular time (I think I laid out a lot of the reasons well in a comment on this post). Qian and I know that this is a terrible time to be leaving China and going to America. But at the same time, it's something we really have to do right now.

In a selfish way, it angers me that some of the brightest minds in America, and the rest of the world, are now focusing their attention on China. I want to, in a way, keep the country "mine" and want to have my unique experience of being in China for more than three years stay a really remarkable thing.

But, of course, this is a ridiculous feeling for me to have. I'd be a fool to think that intelligent people from around the globe wouldn't want to come to China to take advantage of the situation that is being presented right now. And in another way, China is going to be a much better place the more that foreigners come here and the more exposed its people get to the rest of the world. The benefits of foreigners coming to China now will affect both the country and myself positively in the future, I feel.

So, overall, this article above and hearing about western people finding success in China are good things. It's just that reading stories about westerners becoming quasi-economic refugees and leaving the States when I'm a few days away from heading back to America gives me some conflicting feelings.

Anyone who's read my blog with any frequency the past few months knows about my disillusionment with a lot of the aspects of American life and about how I feel that the economic crisis is not a little blip on the ever climbing path of unlimited and unrestrained growth. I have serious concerns about the direction America is headed and particularly about what Qian and I are going to do with ourselves upon our return.

Saying all that, I'm confident that, despite the bleak economic scene in America, we are going to end up being alright.

A week or two ago, Qian's parents, Qian, and I got together for a formal dinner where I, essentially, asked for her hand in marriage. At that time, Qian's dad grilled me a bit about what our plans are and how we're going to survive in America. I feel like my response was one of my all-time most awesome uses of Chinese ever (her dad, of course, does not speak English).

He told me that Qian is there only child and that they are worried about her being on the other side of the planet in a country with a struggling economy. I assured him that I'm strong enough and resourceful enough to both take care of Qian and provide her a decent life in America. I used my life in China as an analogy. I asked him to remember the first time I met him a year and a half ago and how crap my Chinese was and how much I didn't understand about China and its customs. I then talked about where I'm at now both with my Chinese and with my general knowledge of how China works. I pointed out to him that I'm now a manager with ten people working underneath me at the school I work at and have done a good job at adjusting to life in China. I told him that I will get things done in America and will do them well.

After I finished my minute or two of talking, he flashed me a huge smile, stuck out his hand, and said "OK!" We then gave each other a very firm hand shake. Apparently I'd convinced him that I'm 厉害 enough to marry his daughter. That conversation and the look on his face throughout the conversation are things I'll never forget.

The things I said to him were all strong statements and ones that I'm going to have to back up. I'm confident I can though.

Qian and I are about to 逆流而上, yet we are committed to living in America for at least two years (when she can receive a green card) and possibly much longer if things are going well. We're both a combination of nervous and excited. Us going to America is scary and it is a gamble. But I truly believe that we're about to embark upon a fantastic journey.

Help Wanted

Despite rising growth numbers and a booming stock market, China's jobs situation looks a lot like the rest of the world's.

From AFP:

Image from AFP of a jobs fair in Beijing

BEIJING — China Tuesday warned of a "grave" situation in the jobs market with millions of graduates and migrant workers yet to find work as companies continue to struggle with the effects of the global slump.

"China's current employment situation is still grave and the pressure for job creation remains large," said Wang Yadong, a senior official at the Ministry of Human Resources and Social Security's employment section.

"To make things worse, the impact of the international financial crisis has not yet bottomed out and a lot of companies are still facing business difficulties, posing big unemployment risks," he told reporters.

Wang said around 147 million migrant workers had moved to cities for jobs by June but more than four million had yet to find one.

Moreover, three million university graduates, including those who had left last year, were still unemployed, he said.

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It's disconcerting to see that the non-elites of the world are the ones who are still feeling the brunt of tough times these days. While the people in the above article look for something to do with themselves, the wealthy and those who've gotten in on the stimulus money are bankin' it playing the stock market.



Funny how the world works.

US/China Summit

China and America kicked off an important round of meetings yesterday.

Photo found on Trailerparknews.com

For many years, U.S. officials traveled to Beijing and lectured the Chinese about the value of their currency and the need for economic and political reforms.

On Monday, about 200 senior Chinese officials traveled to Washington and heard soothing words of reassurance from U.S. officials: The dollar is still sound, your investments are safe and we are working really hard to restructure our economy.

Such is the nature of the U.S.-China relationship today. Behind all the reassuring language is a nervous sense that the fate of the world economy is increasingly dependent on the United States and China working together.

President Obama opened the first meeting of the U.S.-China Strategic and Economic Dialogue on Monday by declaring that the two countries share a responsibility for the 21st century, and should strive to cooperate not only on economic matters but also on key issues such as climate change, nuclear proliferation and transnational threats.

"The pursuit of power among nations must no longer be seen as a zero-sum game," he said at the start of the two-day meeting, held at the Ronald Reagan Building and co-chaired by Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy F. Geithner. "Progress -- including security -- must be shared."

The meetings are intended mostly to allow officials to exchange views on a wide range of issues and to establish contacts in each other's governments. On Monday, Obama gave a gentle prod to China on its human rights record, noting that "all people should be free to speak their minds," but otherwise focused on forming with China a partnership "of opportunity."

...

"The United States will never become China, and China will never become the United States," he (State Councilor Dai Bingguo, who oversees foreign policy) added. "But the living fact is that China and the United States' interactions have never been so frequent, our interest has never been interwoven so closely, and the mutually beneficial cooperation between our two countries has never been so broad, and the driving force boosting the China-U.S. relationship has never been so strong."

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I hope that these talks can be fruitful and do some good.

There's little doubt that the election of Obama has done a good job of garnering favor from the citizens of the world. America's favorability ratings in China went from 34% in 2007 to 47% now in 2009. Hopefully some of that good will has also spread to the leaders of China and countries around the world.

There's no doubt that America is mired in a terrible recession. I will not argue with that. The conventional wisdom is that China is the lone nation leading the world out of such dire circumstances. That, I'm not 100% sure about.

There are a few signs around that China's growth might not be all that it's cracked up to be. I'm sure China is optimistic that its massive stimulus and vast amounts of resources will give it keep it's economy going, yield it more power in the international community, and give it the upper-hand in the US/China relationship. It might very well, but I believe there are some reasons to question this thinking.

If these kinds of talks and a general respect from each side towards the other can keep China and America's relations normalized, the world will benefit. There'll sure be huge problems as the world moves forward - both with the economy, the environment, and a huge array of other issues. I'd like the US and China to work together on these things. I don't think the world is going to be able to afford having the two countries at each others' throats.

Forging Ahead

In an attempt at getting back into news blogging, I searched through Google News for China articles today. There's a lot going on here in the Middle Kingdom. I'm going to try to highlight a few of the pieces I found most interesting.

First, on the changing role of China's currency from The Financial Times:

Image from Daylife.com

China has taken another step towards internationalizing its currency and reducing reliance on the US dollar with the announcement of new rules to allow select companies to invoice and settle trade transactions in renminbi.

The regulations released by the People's Bank of China, the country's central bank, will allow approved companies to settle transactions through financial institutions in Shanghai and other cities in southern China.

Offshore, the trial scheme will allow transactions to be settled in renminbi in Hong Kong and Macao, the two self-governing territories on China's southern borders, and later in a limited fashion in south-east Asia as well.

Importers and exporters will be able to place orders with authorised Chinese companies, and settle payment for them, in renminbi.

Although it has no short-term implications for the full convertibility of the renminbi, the announcement adds to the volley of political signals Beijing has sent recently over its dissatisfaction with the US dollar.

"To many minds in China the US dollar's time is almost up, the eurozone suffers from political paralysis and a too-conservative central bank, while two decades of economic stagnation and a shrinking population do the yen no favours," said Stephen Green, of Standard Chartered, in Shanghai.

"For them, the renminbi is an obvious, and imminent, replacement."

Far from being a replacement for the dollar as a freely-traded reserve currency, the move has been justified by the PBoC initially as assisting exporters buffeted by the greenback's fluctuating value.

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Until now, China's yuan/RMB has not been an international currency. So, as I understand it, the currency is only capable of being used in the People's Republic of China.

I just did a bit of searching on why this has been the case. I couldn't find much except from this Wikipedia article on the Chinese RMB:

The second series of renminbi banknotes was introduced in 1955. During the era of the command economy, the value of the renminbi was set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the opening of the mainland Chinese economy in 1978, a dual-track currency system was instituted, with renminbi usable only domestically, and with foreigners forced to use foreign exchange certificates. The unrealistic levels at which exchange rates were pegged led to a strong black market in currency transactions.

In the late 1980s and early 1990s, the PRC worked to make the RMB more convertible. Through the use of swap centres, the exchange rate was brought to realistic levels and the dual track currency system was abolished.

The renminbi is convertible on current accounts but not capital accounts. The ultimate goal has been to make the RMB fully convertible. However, partly in response to the Asian financial crisis in 1998, the PRC has been concerned that the mainland Chinese financial system would not be able to handle the potential rapid cross-border movements of hot money, and as a result, as of 2007, the currency trades within a narrow band specified by the Chinese central government.

China is seeing the present-day as the time when it can life its controls on the yuan and begin implementing it as an international currency. Although the role of the Chinese yuan is changing, China says that the country is still fully committed to the US dollar and that the internationalization of the yuan will not challenge the US dollar as a world reserve currency in the near future.

Regardless of exactly how the yuan develops internationally, these steps from China towards getting the yuan out on the international market are a significant event.

The second article, from a few days ago in The New York Times, is about China's investment into oil in Iraq:

Image from Arabianoilandgas.com

HONG KONG — Oil companies from China, the world’s second-largest and fastest-growing consumer of oil, bid aggressively on Tuesday as Iraq began auctioning licenses in six large oil fields.

A partnership of BP and the China National Petroleum Corporation, or C.N.P.C., won the first contract awarded, in the latest indication of Chinese interest in Iraq, a country that has until recently seemed to be firmly in the American sphere of influence for natural resources.

...

Few Americans or Iraqis may have expected China to emerge as one of the winners in Iraqi oil, particularly after six years of war. But signs of stability in Iraq this year, and a planned American military pullout from Iraqi cities on Tuesday, happened to coincide with an aggressive Chinese push to buy or develop overseas oil fields.

The Chinese companies “have been interested in Iraq,” said David Zweig, a specialist in Chinese natural resource policies at the Hong Kong University of Science and Technology. “They were interested in Iraq before the war, and now that things have improved somewhat there, it’s on their agenda.”

Some experts contend that the West should not be concerned about a substantial Chinese presence in Iraqi oil fields, because it gives China greater stake in improving stability in the region.

“If you want China to be a responsible stakeholder in the world, you need to let China buy stakes in the world,” said Mark P. Thirlwell, the program director for international economics at the Lowy Institute for International Policy in Sydney, during a speech in Hong Kong on Tuesday.

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It's great to know that the 4,323 US soldiers killed in Iraq so far and thousands upon thousands wounded have expanded the universe of Chinese oil resources.

And third, from The International Business Times on China's stock market:

Image from Daylife.com

A nice little bubble is simmering away in China: not the vaunted stimulus-induced recovery, but the country's stockmarket which is becoming increasingly heated.

Chinese shares closed higher again on Friday, a phrase that has become all too monotonous in recent months as the market has soared.

Chinese shares have now jumped 65% since the beginning of this year.

Media reports suggest that tens of billions of dollars in bank loans are riding in the market; stimulus money that is being parked to earn big profits by banks and other companies before it's spent.

...

The surge in China has all the appearances of an emerging bubble, especially with reports in the local media of high prices being paid for property in Beijing and some other major coastal cities.

Read On

In a taxi last week in Beijing, Qian had a conversation with the driver that I could kind of follow along with. She was asking him about real estate prices. The driver told her that the prices are continuing to go higher and higher in Beijing.

I couldn't believe this.

One of the most striking things to me about Beijing is the endless skyline of twenty-or-so floor apartment blocks. When coming back from the Great Wall with our friends, I asked, "Are we getting into Beijing now?" Our friend who lives in Beijing responded, "No, not yet. There aren't any high-rise apartments around us. That's when you know you're starting to get into Beijing."

My friend, Elliot, had a good point. The sprawl that surrounds Beijing is vast. And the amazing thing is the ubiquitous scene of cranes putting up new apartment buildings.

I understand that Beijing is a massive city of about thirteen million people and those people all have to live somewhere. But it seemed to me, from being in the city, that the apartment situation is getting a bit insane.

To hear that China's stock market surge is, at least partly, being fueled by high real estate prices is concerning to me. I don't see how real estate prices can continue to rise when there are already so many apartment and so many more are going up and the world is mired in a once-in-a-lifetime economic crisis.

I've talked before about Beijing's unfathomable commercial real estate glut.

This post was fun. Hopefully I can continue to find time to make posts like these.

Building Walls

Getting involved in a tit-for-tat with the United States, China has decided to promote nationalist economic policy.

From The Associated Press:

Image from Time

BEIJING (AP) — China has imposed a requirement for its stimulus projects to use domestically made goods — a move that could strain ties with trading partners after Beijing criticized Washington's "Buy American" stimulus provisions.

Projects must obtain official permission to use imported goods, said an order issued by China's main planning agency and eight other government bodies.

Even before the order, business groups worried that foreign companies might be excluded from construction and other projects financed by Beijing's 4 trillion yuan ($586 billion) stimulus. Foreign makers of wind turbines complain they have been shut out of bidding on a $5 billion stimulus-financed power project.

"Government investment projects should buy domestically made products unless products or services cannot be obtained in reasonable commercial conditions in China," says the order, dated June 1 and reported this week by state media. "Projects that really need to buy imports should be approved by the relevant government departments before purchasing activity starts."

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I can see why China is doing this. They're responding to the actions of other countries. I can also see why, if available, it would be better to buy something in China as opposed to buying a similar product from abroad.

While I get why, economically, China would add this new provision to its stimulus, it seems like a dangerous political path to do down considering how important foreign exports and imports are to China. China has more to lose than just about any country if the world's economies all go insular.

I suppose I'm holding China to a higher standard than the rest of the world, but it seems to me like China would be smart to continue to try to promote what's gotten the country ahead, foreign trade, even if the other countries in the world are making globalization difficult.

An editorial from The Telegraph discusses China's actions:

As the world’s top exporter with a $400bn current account suplus and an economy that lives off the America and European market, it will pay the highest price if it triggers a global retreat into protectionist blocs.

The Chinese elite no doubt feel provoked by what they call the “poison” of the US `Buy American’ clause, but the Obama White House managed to tone down the worst excesses of Capitol Hill and in any case the Chinese version is more restrictive.

It bans the purchase of foreign equipment for investment projects unless a special exemption is obtained. The measures apply to European goods, even though EU states have not imposed any such “Buy Europe” clause of their own. EU producers of wind turbines have already been excluded from a $5bn wind project, whether or not they have factories in China.

Beijing risks making the same catastrophic error as the US Congress when it passed the US Smoot-Hawley Tariff Act in 1930. America was then the rising surplus power, like China today. It was the chief beneficiary of an open global system.

By imposing tariffs, Washington triggered massive retaliation. While nobody escaped the Great Depression that ensued, the effects were unequal. The US suffered a far steeper decline in output than the rest of the world. Britain muddled through relatively well in a trade bloc behind Imperial Preference.

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China, the lone "beacon" of the world economy, is sputtering. It's exports and imports both continued their free-fall in May. It seems premature to me that some are saying that China is getting out of its funk.

Maybe the domesticating of economies around the world is the right thing to do at this time. My gut reaction is that it's a bad idea. But maybe it is the bitter medicine that the globalized world needs. The globalization that's occurred over the past couple decades certainly led to a lot of unsustainable growth and has a lot to do with the mess that we are in now.

China very well may see the way things went for the past decade as obsolete and a recipe for disaster. All of the export-led growth certainly hasn't been a completely smooth path for the country. I wouldn't blame China for wanting/needing to change the direction its economy.

Of course, if China and the rest of the world shifts course on globalization and tries to right the imbalances that came about during the last decade or two, then everyone in the world needs to re-think what "recovery" is going to look like when that happens. That kind of recovered world definitely wouldn't look like the world of, say, 2007.

The Challenge of Fuel-Efficient Cars

As China gets richer, its people would like to have more comfortable cars.

From Reuters:

Image from Lamarguerite.wordpress.com

BEIJING (Reuters) - China's energy policymakers have lately been thinking a lot about drivers like 24-year-old Cindy Chen, who chose a larger German Opel over smaller, more fuel-efficient models when she bought her first car in March.

Like many motorists of the "single child" generation -- kids of baby boomers born in the 1950s -- Cindy is showing early signs of an American-style auto affair, heedless of Beijing tax breaks meant to encourage sales of smaller cars, whose market share grew to over two-thirds of all new car sales in the first quarter.

"Daddy bought it for me, so why not a big one?," said Cindy, a lawyer with a local government office in eastern Ningbo city.

But she will have fewer incentives to drive the way her American counterparts do after policymakers on Monday raised diesel and gasoline prices by 6 and 7 percent respectively, the second increase this year but the biggest since last June.

While some criticized it as a half-measure that barely matched half of the recent rise in global crude oil costs, the increase takes gasoline prices to near their peaks last June, in stark contrast to U.S. prices that are half last summer's highs and are now about 40 percent cheaper than Chinese pump rates.

Early anecdotal evidence suggests the shock of steadily rising prices this year may be causing car-owners to think twice before hitting the road after five years in which authorities sought to cushion the blow for consumers, adding to demand.

"I never really thought about petrol cost before. My panic about oil prices started last summer... Now my pay has not increased but oil went up again. I will certainly start to plan for driving nowadays, like a car pool if driving long distance," said Zhang Yun, who drives a 2.7-liter Hyundai Tucsan.

At stake is nothing less than the outlook for global oil prices, which have rallied in part on hopes for a sustained recovery in demand from No. 2 consumer China, where gasoline use has led the pick-up in consumption seen in recent weeks.

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This discussion of Chinese gasoline prices reminds me of a blog post I read a few weeks ago from the relatively new and popular China blog - China Smack. Here is what a blogger there had to say about China's gas prices:

The above is States Average Gas Prices is “United States average gasoline prices”.

For example: Wyoming state 1.753, Wyoming (unit should be USD/gallon?)

If we use the foreign exchange rate I just checked: 1 USD = 6.8311 yuan RMB

And 1 gallon = 3.785 liters

Conversion (U.S.) price: ?

1.753 USD * 6.8311 / 3.785 liters = 3.16 yuan RMB / liter (American gasoline price)

According to what netizens have said today, Yichang’s 93 octane gasoline is approximately 5.20 yuan/liter??

Yichang (it is said that Beijing, etc. are even higher) gasoline prices compared to Wyoming state is higher by %
(5.2-3.16) / 3.16 * 100% = 2.04/3.16 * 100% = 65%! ! ! !

Our gasoline prices per liter is 2.04 yuan higher than the United States, exceeding 65%!!!

And they do not have grade one, grade two road fees, bridge fees, highway fees…

And their average wages are perhaps 10 times our average wages…

Read On

Obviously, this guy was not happy about the gouging he was feeling at the pump.

The only problem I have with the calculations done above is that taking Wyoming's gas prices may not be the best indicator for America's prices as a whole. Wyoming, in America's mountain west, has the lowest population of the entire country. Even lower than Alaska. So the prices in rural Wyoming are going to be lower than those in more populated areas.

But overall, the price of Chinese gasoline compared to American prices are way higher. But I also remember from studying abroad in Europe in 2003 that Europe's gasoline prices are also significantly higher than America's.

So this leads me to the question: is it really fair to compare China's gas prices to America's? Instead of China's prices being "too high," are America's prices "too low?"

Doing a quick Google search, I found this list of the countries with the most and least expensive gasoline prices in the world as of last summer. The results of the prices from major cities within the country, from promotionalcodes.org.uk, are interesting:

Most Expensive Countries
1. Oslo, Norway - $9.85/gallon
2. Paris, France - $9.43/gallon
3. Copenhagen, Denmark - $9.24/gallon
4. Rome, Italy - $9.03/gallon
5. London, England - $8.96/gallon

Least Expensive Countries
1. Caracas, Venezuela - $0.12/gallon (!!!)
2. Tehran, Iran - $0.41/gallon
3. Riyadh, Saudi Arabia - $0.47/gallon
4. Kuwait City, Kuwait - $0.92/gallon
5. Cairo, Egypt - $1.24/gallon

These prices were from when gasoline was at an all-time high last summer. So the prices will be off compared to what they are now. But I imagine that the rankings are still fairly similar. China and America aren't at the top or bottom of the world's prices. Although it does appear obvious from the China Smack calculations that America is more setup for "happy motoring" than China is.

With GM and Chrysler now bankrupt, the days of Americans truckin' around in SUVs may very well be over though.

There was an intelligent discussion of Detroit's bankruptcies on NPR's podcast "Planet Money" the other day. Frank Langfitt, an NPR correspondent, was present at the Chrysler bankruptcy hearings this past week. He had some really interesting insights on what is going on with the government's take over of Detroit.

Indeed, the American car industry as we knew it is long gone.

I'm going to transcribe a couple of the key points, but I really recommend that you listen to it for yourself here.

From a discussion between Laura Conaway and Frank Langfitt on the Planet Money podcast:

Langfitt: Now what the government always says is, "We don't want to run this company. We want auto executives to do it." At the same time, let's take a look at that Fiat deal. One of the things they said to Fiat is, "It you want another 5% stake in Chrysler, you're going to have to deliver a 40 mile per gallon engine in the United States."

Conaway : So the Obama administration is directly saying to Fiat that you can have some more of Chrysler, but you've gotta give us a car that does like this on the road?

Langfitt: Exactly. So you can say publicly, as the president has, we're not going to dictate policy, but you already have the White House saying, "If you want X, you're going to have to deliver Y," and Y is a very fuel efficient engine, which is what the government's policy is towards oil and part of its energy policy and part of its automotive policy. So, it's very hard to divide this up when you have a government that has other political agendas that are related to the car industry.

Conaway : And let's talk for a minute about those agendas because government comes with one set of goals - more fuel efficient cars, maintaining the employment rate or getting the unemployment rate down in places like Michigan and Ohio, nobody in those places want to see the auto industry go away. But a profit-making company like Chrysler comes at things from a very different set of goals. First and foremost has to be, by law, maximizing profit.

Langfitt: Absolutely.

Conaway : How do you reconcile those?

Langfitt: It's going to be fascinating. This is going to be one of the big meta-stories of what's happening with the auto industry because if you talk with people in Michigan, they say smile and just nod their heads when Obama says anything. They say, "Sure boss, we'll do whatever you want." But they say it's been very difficult traditionally for those companies to make much money on small cars. The profit margins are very narrow. People perceive, rightly, that Toyota and Honda are better at making them. And so they're concerned about these fairly significant fuel standards and that they're going to have to make small cars that they can't make money off of, which would run counter to the tax payers' interest, which is getting some kind of return on the money we've put into these companies. So in some ways, these things can be very much at odds and how it plays out is going to be fascinating.

The discussion continues. It is really great. I just can't be bothered transcribing any more of it. This section was the most interesting to me anyways.

This contradiction between profitable cars and cars that the Obama administration wants the companies to produce is incredible. I can see where Obama is coming from. It is in America's best interest to get away from its oil addiction and try to drive smaller cars. Yet it is hard to see how the companies that the US is now gobbling up are going to be able to sustain themselves on such cars.

There are no clear answers as to how the collapse of the US auto industry can or will be reconciled. What happens over the coming months and years is going to be remarkable to witness.

The Fading Appeal of Cubicle Training

In these tougher economic times, there are some early indications that young Chinese people are not as interested in taking part in China's university boom.

From China's Xinhua News:

Image from Ernop's Flickr page

BEIJING, May 31 (Xinhua) -- China expects fewer students to participate in the upcoming three-day annual college entrance exam this year, according to Sunday version of China Daily.

The college entrance exam has been seen as the make-or-break benchmark for millions of Chinese young people since 1977.

Minister of Education Zhou Ji had predicted that the overall number of applicants would exceed 10 million -- last year's total was 10.5 million -- but figures from local governments suggest the number of students taking part may be far fewer, the newspaper said.

In Shangdong, a provincial economic powerhouse, education officials said they received 100,000 fewer applicants this year than they did in 2008 -- a drop of more than 10 percent.

...

"Since the financial crisis last year, the grim employment situation has broken the 'employment myth' for those with a college degree. Some students changed their minds about getting a good job through higher education. They simply quit (from taking the exam)," an anonymous recruitment officer with the Beijing Institute of Technology was quoted as saying.

Read the Entire Article

This kind of news isn't surprising. I hear all the time from young people in Xi'an about graduates from last year's university class who still can't find work. There are about to be several more million fresh graduates entering the job market in a few weeks also looking for jobs. Times are looking bleak for educated Chinese young people trying to find work doing what they studied at university.

This phenomenon of people questioning the value of high-level education is not limited to China. America is currently undergoing a similar debate.

An article from last week's New York Times' Magazine - "The Case for Working With Your Hands" - does a great job talking about the more academic life young Americans have been molded for and the more labor intensive jobs that they are told to avoid.

Here's the beginning of the article:

The television show “Deadliest Catch” depicts commercial crab fishermen in the Bering Sea. Another,“Dirty Jobs,” shows all kinds of grueling work; one episode featured a guy who inseminates turkeys for a living. The weird fascination of these shows must lie partly in the fact that such confrontations with material reality have become exotically unfamiliar. Many of us do work that feels more surreal than real. Working in an office, you often find it difficult to see any tangible result from your efforts. What exactly have you accomplished at the end of any given day? Where the chain of cause and effect is opaque and responsibility diffuse, the experience of individual agency can be elusive. “Dilbert,” “The Office” and similar portrayals of cubicle life attest to the dark absurdism with which many Americans have come to view their white-collar jobs.

Is there a more “real” alternative (short of inseminating turkeys)?

High-school shop-class programs were widely dismantled in the 1990s as educators prepared students to become “knowledge workers.” The imperative of the last 20 years to round up every warm body and send it to college, then to the cubicle, was tied to a vision of the future in which we somehow take leave of material reality and glide about in a pure information economy. This has not come to pass. To begin with, such work often feels more enervating than gliding. More fundamentally, now as ever, somebody has to actually do things: fix our cars, unclog our toilets, build our houses.

When we praise people who do work that is straightforwardly useful, the praise often betrays an assumption that they had no other options. We idealize them as the salt of the earth and emphasize the sacrifice for others their work may entail. Such sacrifice does indeed occur — the hazards faced by a lineman restoring power during a storm come to mind. But what if such work answers as well to a basic human need of the one who does it? I take this to be the suggestion of Marge Piercy’s poem “To Be of Use,” which concludes with the lines “the pitcher longs for water to carry/and a person for work that is real.” Beneath our gratitude for the lineman may rest envy.

This seems to be a moment when the useful arts have an especially compelling economic rationale. A car mechanics' trade association reports that repair shops have seen their business jump significantly in the current recession: people aren't buying new cars; they are fixing the ones they have. The current downturn is likely to pass eventually. But there are also systemic changes in the economy, arising from information technology, that have the surprising effect of making the manual trades — plumbing, electrical work, car repair — more attractive as careers. The Princeton economist Alan Blinder argues that the crucial distinction in the emerging labor market is not between those with more or less education, but between those whose services can be delivered over a wire and those who must do their work in person or on site. The latter will find their livelihoods more secure against outsourcing to distant countries. As Blinder puts it, “You can’t hammer a nail over the Internet.” Nor can the Indians fix your car. Because they are in India.

If the goal is to earn a living, then, maybe it isn’t really true that 18-year-olds need to be imparted with a sense of panic about getting into college (though they certainly need to learn). Some people are hustled off to college, then to the cubicle, against their own inclinations and natural bents, when they would rather be learning to build things or fix things. One shop teacher suggested to me that “in schools, we create artificial learning environments for our children that they know to be contrived and undeserving of their full attention and engagement. Without the opportunity to learn through the hands, the world remains abstract and distant, and the passions for learning will not be engaged.”

A gifted young person who chooses to become a mechanic rather than to accumulate academic credentials is viewed as eccentric, if not self-destructive. There is a pervasive anxiety among parents that there is only one track to success for their children. It runs through a series of gates controlled by prestigious institutions. Further, there is wide use of drugs to medicate boys, especially, against their natural tendency toward action, the better to “keep things on track.” I taught briefly in a public high school and would have loved to have set up a Ritalin fogger in my classroom. It is a rare person, male or female, who is naturally inclined to sit still for 17 years in school, and then indefinitely at work.

Read On

This article's author, Matthew B. Crawford, makes some really keen observations and criticisms of the life Americans, and more and more Chinese, idealize as "getting ahead."

In the not too distant past, I meditated (or was it ranted) about the idea of "getting ahead" in contemporary society. I came to the conclusion that the dreams and idealizations that I'd been fed from the time I was a child may have been the product of a society that had lost complete touch with reality. Based on the state of the the US' economic system and the state of its people, I feel justified in questioning how involved I want to get with "The American Dream": a house with a white picket fence and a mortgage, 3.18 children, etc.

I did participate in America's university system. I even got a worthless degree: a bachelor's degree in philosophy. I have student loans still to pay off.

I don't regret my decision to pursue a higher education. In getting a degree that fostered independent thought and developed my mind, I feel as though the education I received was invaluable. My degree isn't going to knock down to many doors in future job applications, but it was a very beneficial thing for my life.

At this point in time though - the summer of 2009 - I completely understand a young adult at the crossroads of life deciding against spending four years of his or her life in a college or university that wants to prepare him or her for a life of sitting in a cubicle.

As the NY Times article posits, skipping a traditional four year university doesn't mean one has to stop learning. I'm very much in support of learning a trade or specialized skills if one chooses against the more cubicle-based path. I'm definitely not against education and learning.

I do feel that the current status of the world and its economic systems calls for young people to reassess the assumptions about where they will fit in the world economy in the years to come though.

Geithner: The China Hand

US Treasury Secretary Tim Geithner's coming to China in a couple days. Although Geithner hasn't arrived yet, China's already begun the meeting.

From Forbes:

Days ahead of U.S. Treasury Secretary Timothy Geithner's visit to China, Beijing has already shut the door for discussion on the appreciation of China's currency, the yuan, pledging it will keep the currency stable to help Chinese exporters.

In an executive meeting of the State Council presided by Premier Wen Jiabao, the leading comrades reiterated their determination in guarding the yuan. "We have to maintain the exchange rate basically stable at a reasonable and balanced level," an official statement declared after the Wednesday meeting.

The Chinese yuan has been hovering around 6.83 per U.S. dollar since the middle of 2008. Analysts said China has virtually repegged the yuan to that level. Over the past two years, the yuan has steadily risen against the dollar, as U.S. officials have been demanding. The Chinese currency surged 7.1% against the greenback last year after gaining 6.9% in 2007 and after rising 3.8% in 2006.

China's trading partners, especially the U.S., have been urging China to allow the currency to further appreciate to ease global trade imbalances. U.S. Treasury Secretary Timothy Geithner might put the topic on his agenda to discuss with Chinese officials in his trip to China from May 31 until June 2.

Yet, China regards the sharp fall in its exports as the biggest difficulty in keeping its economic on growth track. Because a stronger Yuan would crimp exports further, there is not much hope Geithner would find willingness from China to engineer a rise in its currency - particularly when Beijing blames excesses in the U.S. for the global financial crisis that has slowed Chinese growth.

Read On

A couple weeks ago, the New York Times Magazine ran an informative and interesting article on China and America's relationship going forward. The lede of the article talks a bit about Geithner and his ties to China.

On Timothy Geithner’s first day as a Dartmouth freshman, while he was walking across campus on his way to register for classes in the fall of 1979, he heard a man speaking Thai — swearing in Thai, to be precise — from a balcony. Geithner found this amusing, because only a couple of months before, he left his home in Thailand, where his father worked for the Ford Foundation, to move to Hanover, N.H. So he stopped to talk to the man, who turned out to be David Keenan, a Chinese teacher at Dartmouth. The two quickly realized that they had a lot in common; among other things they attended the same schools, about a decade apart, in Bangkok and Delhi. (The cause of Keenan’s swearing, alas, has been lost to history.) Having established a rapport, Keenan then decided to do a little salesmanship. He urged Geithner to take Chinese, the only Asian language that Dartmouth offered at the time.

Geithner did, and found that he liked it. Learning another Asian language, he told me recently in his soaring office at the Treasury Department, “was a nice little piece of continuity for me.” He ended up majoring in government and Asian studies and taught basic Mandarin classes to make some money. After Dartmouth, he attended the School of Advanced International Studies at Johns Hopkins. He then spent three years at Kissinger Associates, working with Brent Scowcroft, the future national security adviser, and helping Henry Kissinger write chapters on China and Japan for one of his books. From there, he joined the Treasury Department and began a meteoric rise through the bureaucracy.

In the five months since Barack Obama introduced him as the next Treasury secretary, Geithner has already run through what seems to be a career’s worth of images: the brilliant technocrat whose appointment caused stocks to soar; the neophyte public figure who flopped in his debut; the regulator who has grown too close to Wall Street; the Obama adviser with the same unflappable nature as his boss. One image that hasn’t yet attached itself to him, however, is his original professional image. By training, Tim Geithner is a China hand. And though the immediate financial crisis is likely to dominate his tenure at Treasury, the economic relationship between the United States and China may ultimately prove just as important. It could be crucial to preventing the next crisis.

Read On

Geithner has a big week ahead of him. Placating the Chinese on the stability and viability of US dollars while at the same time trying to work on China and their currency, uhh, that "m-word," is going to be a tight-rope walk to say the least.

Hopefully Geithner really is a "China hand" and will perform well in the contradictory and confusing world that is Chinese politics. The US is going to need China to stay on board with them over the next few years. If Geithner could somehow turn out to be a gifted negotiator with the Chinese (yeah, I know it's a stretch), that would cancel out a lot of the stumbles he's made so far in office.

Geither to China

Secretary of State Hillary Clinton came earlier this year. President Barack Obama will be here later this year. Treasury Secretary Tim Geithner is now planning to visit China early next month.

From Reuters:

Image from Salon

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner will visit Beijing next month for two days of meetings with top Chinese officials aimed at strengthening the economic relationship between the United States and China, the Treasury Department said on Tuesday.

Geithner is due to meet top Chinese economic policymakers on June 1-2 "to discuss a range of issues of importance to both countries, including strengthening U.S.-China economic ties to promote stable, balanced and sustained economic growth in the two nations," the Treasury Department said in a statement.

The trip is Geithner's first to China since taking office.

Read On

There's little doubt about which country America's leaders need to placate during this economic crisis. Geithner is going to try to instill confidence about China's further backing of the US debt. China is going to want assurances that the US has a plan to get its economy back on track. China needs the US to get out of its current funk.

From AFP:

WASHINGTON (AFP) — China may not be able to sustain its economic expansion in 2010 if there is no recovery particularly in the United States and Europe, a senior World Bank official said Tuesday.

China posted growth of 6.1 percent in the first quarter of 2009, down from 6.8 percent in the final three months of 2008, underlining the impact the global crisis is having on the world's third-biggest economy.

"I think the key concern is if the rest of the world begins to recover, in particular Europe and the US, China's exports market returns, then there is a high probability that we get higher growth rates next year -- that is the key determinant," said Jim Adams, World Bank's Vice-President for East Asia and Pacific region.

...

If there is no recovery in the United States and Europe, which are top export markets for China, Beijing has to provide domestic stimulus to fuel growth in the world's most populous nation, he said.

If the United States, for example, grew at a pace of three percent next year as projected by the government, "then I think we will be quite confident China will be able to increase its growth rate next year.

"If not, China has to rely on domestic stimulus," he added.

"The ability of the government to sustain 6.5 percent (growth) is heavily within the control of the government because the government has the fiscal resources to provide the stimulus," Adams said.

Read On

Now that stimulus packages have rendered the governments of the world the driving forces in the global economy, I hope that China, the US, and the other countries' leaders navigate us well through this mess. But based on how bailouts and other measures have gone so far, I'm not sure that there should be too much optimism for this to happen smoothly and efficiently.