IOU/USA

There is a massive public art project currently on display in midtown Kansas City across from the KC Federal Reserve building. I went down to the site with my camera today to take a few photos.

Side 1 of the display:



Side 2 of the display:


This art project is a 15 x 7 x 1 political statement - the letters "IOU" on one side and the letters "USA" on the other - arranged out of 105 empty shipping containers.

Here is a write-up about the project from the Kansas City Star:

A new monument with attitude awaits visitors to Kansas City’s Memorial Park over the next four weeks.

Towering over the park’s existing bronze memorials is a huge wall composed of 105 cargo containers. And it has a message.

The containers are mostly red, white and blue, and the white ones have been placed to spell out “IOU” on one side and “USA” on the other. The occasional green container prompts thoughts of money, especially as the 65-foot-tall structure stands across from the Federal Reserve Bank of Kansas City.

Noted sculptor John Salvest created the temporary installation as a project for Grand Arts, and considering the nation’s struggle with debt on all levels — from personal home foreclosures to the recent downgrade of the nation’s credit rating — the timing is spot on.

Read On

Debt and the US' global economic position are no longer esoteric academic issues only concerning the educated of society. The US' debt problems are at the heart of mainstream America. Whether it was the debt ceiling debate debacle this past summer or the jobless reports that come out each week, the news of America's economic woes and debt crises are inescapable.

This gargantuan exhibit highlighting debt's prominence in American society is powerful. I think that shipping containers and everything that they invoke - China, trade imbalance, America's empty factories, the shallowness of materialism, etc. - are the perfect vehicle for the artist's message. The sheer physical scale of these containers is tremendous.

I took several more photos that I've posted below. Below those is a time-lapse YouTube video of the shipping containers being erected.









Edit 10/15/2011: For what it's worth, Kansas City's Occupy protest is going on at this display. Below is a wonderful photo showing this from ericbowersphoto.com. To see more of Eric's photos of Occupy KC, click here:

Currency Affairs

I was delighted to hear a discussion on the radio today of an issue I tried explaining to a colleague recently: why China, a developing country, has so much money and currency reserves. I got pretty fumbled up trying to explain it. Such monetary and economic concepts can be difficult for me to thoroughly understand.

Here's the "Planet Money" report from NPR's Morning Edition that touched on the basics of US/China monetary policy this morning:

The United States government is also thinking about its financial relationship with China. Lawmakers from both sides of the aisle are calling for Treasury secretary Timothy Geithner to declare that China is manipulating its currency. Geithner will deliver a report to Congress about two weeks from now.

In the meantime, lawmakers like Ohio Democrat Tim Ryan are saying things like Chinese currency distortion is putting a lot of Americans out of work. And if you're wondering what a decision by the Central Bank of China has to do with workers in Ohio, we have an explanation from Alex Blumberg of our Planet Money team.

ALEX BLUMBERG: To understand why American lawmakers are so upset about Chinese currency policy, it helps to follow the money. So let's start with someone pretty typical - an American businessman who gets stuff made in Chinese factories.

Listen to the Report or Read the Rest of the Report

The rest of this story is a discussion of how and why Chinese factory owners turn the US dollars they earn into Chinese RMB. This part of China's "high savings rate" isn't discussed too often.

I read a very thorough overview of this same process a couple days ago in James Fallows' book - Postcards From Tomorrow Square: Reports From China. The chapter - The $1.4 Trillion Question - has a very detailed explanation of how dollars wired to factory owners in China end up being converted to dollars and, often, treasury bills. Very well-presented information. The book is a collection of Fallows' Atlantic Monthly China articles over the past few years. I'm enjoying it a lot.

Another one of the chapters in the book also dealing with economics and finance - China Makes, the World Takes - has an insightful take on the US' view towards China and the "currency manipulation" that was discussed in the NPR article above.

From pages 104 and 105 of the book:

American complaints about the RMB, about subsidies, and about other Chinese practices have this in common: They assume that the solution to long-term tensions in the trading relationship lies in changes on China's side. I think that assumption is naive. If the United States is unhappy with the effects of its interaction with China, that's America's problem, not China's. To imagine that the United States can stop China from pursuing its own economic ambitions through nagging, threats, or enticement is to fool ourselves. If a country does not like the terms of its business dealings with the world, it needs to change its own policies, not expect the world to change. China has done just that, to its own benefit - and, up until now, to America's.

Fallows is right on in this passage.

China is a sovereign nation. I don't understand why US politicians feel as though their opinion has any sway on Chinese currency policy. It shouldn't and, it appears, doesn't matter what the US says. Even if the rest of the world and China would benefit from a shift in policy, it's only the Chinese government's decision to revalue its currency. It's not as if the US thinks about other countries before it acts.

I understand that US politicians huffing and puffing about China are may very well just be politicking. But even if they know that their words aren't going to affect China and are simply dissing China's "manipulation" for votes, I still don't like it. Such China-bashing is allowing Americans to feel as though we don't have to change and that our problems are being caused by others. That is just not true.

Whether I approve of what US politicians are or aren't saying, there's no doubt that the US/China political rhetoric on this topic is important. And speaking of the US/China relationship, just preceding this discussion on NPR this morning was an interview with Zachary Karabell, the author of Superfusion who I interviewed this past fall. I felt pretty cool having interviewed the same guy who was being interviewed on Morning Edition! (I am still grateful that Karabell gave me the time to have such an in depth interview with him a few months ago).

Crazy Story from SW China

China attracts all different kinds of expatriates.

From The New York Times:

Image of Dali from travelmarket.com

DALI, China — Justin Franchi Solondz, an environmental activist from New Jersey who spent years evading charges of ecoterrorism in the United States by hiding out in China, was sentenced to three years in prison by a local court on Friday on charges of manufacturing drugs in this backpacker haven.

After serving his time, Mr. Solondz, 30, who is on the F.B.I.’s wanted list, will be deported to the United States, where he faces charges stemming from what the authorities say was his role in an arson rampage that destroyed buildings in three western states as a member of a group related to the environmental extremist organization Earth Liberation Front. He was indicted in absentia in 2006.

The story of Mr. Solondz’s life on the lam spanned three continents, involved at least two aliases and ended in a smoky bar in one of the world’s most authoritarian countries.

Mr. Solondz’s journey started in the fall of 2005, when he joined his mother in Italy for a wedding and then traveled around Europe and Asia. His parents say he stopped communicating with them in March 2006, just before the F.B.I. announced the charges.

The trail went cold until March 2009, when the Chinese police arrested Mr. Solondz here in the mountains of Yunnan Province after he was caught with drugs and fake Canadian identification, according to his parents. During a daylong trial last month, Mr. Solondz pleaded guilty to drug charges and asked to be deported to the United States.

Read On

Click the link and read this whole article. It is bizarre. An Evergreen State student turned narco-terrorist turned drug peddler in southwest China turned Chinese prison inmate.

I've been to Dali. I went there with my friend, Joseph, in the summer of '06 (sounds like I just missed Mr. Solondz). I'd heard all sorts of things about the place. Most of them did, indeed, turn out to be true. It's a different world there; a true hippie paradise. I was horribly sick my whole time there battling giardiasis so I didn't get to see the place as well as I would've liked. But I saw enough to know that it is a one-of-a-kind place in China.

I was shocked that such a place existed in China. I can't imagine that it will much longer though. The article makes it sound like China is on to what goes on in Dali and that authorities aren't going to turn such a blind eye on the place anymore.

Recap of Obama's Trip

One of my favorite podcasts - The New Yorker's "Political Scene" - did a great job discussing Obama's trip to China this past week. The conversation can be heard here.

Evan Osnos, The New Yorker's main China writer, knows his stuff.

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.

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.

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."

Read On

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.

Replacing the Old With the New

The changing of the guard in the world economy is easily seen on the 2009 Fortune 500 list.

From AFP:

Image from China Daily

WASHINGTON (AFP)--The number of U.S. businesses featured in the annual Fortune 500 list of top global companies fell to lowest level ever, the business magazine said, while more Chinese entries appeared than ever before.

Signaling the effects of the devastating financial crisis on the U.S. economy, a non-U.S. firm topped the list for the first time in over a decade, with Anglo- Dutch energy giant Royal Dutch Shell PLC (RDSA) coming in first.

The company brought in $15 billion more in sales than second-place oil rival Exxon Mobil Corp. (XOM) of the U.S.

China's fortunes rose across the board, with a Chinese company - oil giant Sinopec, or China Petroleum & Chemical Corp. (SNP) - appearing in the top 10 for the first time, the magazine reported.

Sinopec supplies about 80% of China's fuel.

Overall, China had an unprecedented total of 37 companies featured on the list, with nine new entries and the others climbing in the rankings.

Read On

This is no surprise. It is interesting to see this list of the top companies in the world on paper though. It's also incredible to think that as recently as the year 2000, General Motors was number one on this famous yearly list. But seeing that the company is still ranked number six makes me think that these rankings (based on gross revenues) don't really give a person a full picture of what is really going on in the business world. The list is still interesting to see nonetheless, I suppose.

Seeing all the Chinese companies on this list surely shows that the economy is moving and shaking and creating revenue. Seemingly unable to make a news post without pointing out bank lending (I know, I know), I have to wonder what's behind those moves and shakes though.

From Bloomberg:

July 8 (Bloomberg) -- China’s new lending surged almost fivefold in June from a year earlier, increasing concern that attempts to revive the world’s third-largest economy will lead to bad debts and asset bubbles.

New loans last month totaled 1.53 trillion yuan ($224 billion), the central bank said on its Web site today. First- half lending rose to a record 7.37 trillion yuan, more than three times the level in the same period a year earlier. The June number is a preliminary calculation, the central bank said.

Chinese banks have now extended 47 percent more loans this year than the central bank’s minimum target for 2009, after the government eased lending restrictions to counter an export collapse. The benchmark stock index rose 69 percent this year and property prices rebounded, while the banking regulator said yesterday that credit growth poses a risk to financial stability.

“There can be no question that China has now moved into dangerously over-stimulatory territory,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong. “The quantity of lending has taken undeniable precedence over the quality of lending and that policy now needs to be reversed.”

Read On

The article goes on to say that China is, in fact, concerned about this trend and that it is trying to encourage banks to buy bonds as opposed to lending more money. We'll see how that goes once things, inevitably at that time, slow down.

My recommendation: If you're with a Chinese business that has a short-term cash-flow problem, get to a bank now because the come-as-you-go days of super-happy-fun lending are (supposedly) coming to an end!

On America's Birthday: 干杯！

As America celebrates its 233rd birthday, I raise it a glass and give it a big 干杯(ganbei) of 白酒(Baijiu)！

Explanation?

From The Financial Times

Image from 21food.cn

Beijingers call the hot and sticky months of July and August the "sauna" season. On muggy summer evenings, sensible locals sweat it out in the capital's old lanes with sticks of fatty lamb kebab and cold bottles of Yanjing beer.

But real men roll up their T-shirts under their armpits, ditch the pansy lager, and instead glug down the local firewater known as baijiu - a potent mash of sorghum, rice, unhusked barley and other grains.

For foreign businessmen forced to drink the stuff at countless banquets, baijiu provides an infamous challenge for the unconditioned palate. But this white spirit - generally 40 to 60 per cent alcohol by volume - is a mainstay of Chinese culture, first popularised during the Xia dynasty 4,000 years ago.

Baijiu, the world's largest spirits category by volume, traditionally dominated the domestic booze market. But in recent years, sales volumes of China's national liquor declined as beer, a foreign upstart, gulped up market share.

Now baijiu-makers are fighting back with a proliferation of new, luxury varieties designed to appeal to the country's growing band of big spenders. Revenues are shooting up at major distilleries and the spirit is giving beer a run for its money.

Read On

Anyone who's been to a Chinese banquet knows the culture of baijiu. The Chinese are serious about this liquor.

My first experience with baijiu in China was a bad one. The people I was drinking with told me, "Have some Chinese wine!" Thinking that I'd be drinking something in the same vain as "wine," I was all for it. After my first glass was poured and the glasses around the table were raised, I didn't even bother smelling the fluid inside the small shot glass. As the "firewater" hit my mouth and throat, I nearly gagged.

"This is wine?!" I remember yelling as I was short of breath after my drink.

The Chinese around the table all laughed and immediately poured me another glass.

I don't need to get into the details of what ensued. You can easily guess. Let's just say the next day I had one of the worst hangovers of my life.

For the next couple years I was staunchly opposed to baijiu. Whenever I was at a wedding or event where people were drinking the stuff, I'd take a drink or two out of politeness but rarely ever imbibed any more than that.

My attitude changed towards baijiu changed last fall when my friend from America, Andy, came to visit me in Xi'an though. On our way out to travel out in Gansu, Andy and I bought a bottle to drink on the train. We then ended up having an absolutely excellent drunken time. A week or two later, we drank some more baijiu at the north peak of Hua Shan when we stayed at a guesthouse there. Another truly great experience.

So since those positive instances last fall, I'm totally fine with drinking baijiu. I can't say I do it that often, but when the occasion arises, whether it be a wedding or a house party, I'm happy to participate.

To America on its best holiday of the year, 干杯 and have a great day!

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.

Read On

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.

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.

The China Cavaliers

A group of Chinese investors are setting themselves up to become the first foreign owners of an NBA team.

From The Cleveland Plain-Dealer:

CLEVELAND, Ohio -- The Cavaliers already have a global star. A clutch-shooting global star at that. Soon they may have a global partner that could help secure that global star's future in Cleveland.

According to multiple sources within the Cavs, franchise majority owner Dan Gilbert has a tentative agreement in place to allow a group of Chinese investors to purchase a significant stake in the Cavaliers Operating Company, the entity that owns the Cavs and operates Quicken Loans Arena. The group is led by JianHua (Kenny) Huang, a Chinese businessman who has become successful by linking American and Chinese companies.

Huang and several of his partners were in Cleveland and attended Games 1 and 2 of the Eastern Conference finals this week. He sat in Gilbert's courtside box Friday night and watched LeBron James hit a buzzer-beating 3-pointer to even the series with the Orlando Magic at one game apiece.

"Dan Gilbert has been approached multiple times over the past few years by investors that wanted to join the Cavs' ownership group," said Len Komoroski, Cavs and Quicken Loans Arena president said in a statement.

"This has recently happened again. As has been done previously, we're in the process of reviewing the possibility presented to us. Beyond that, we do not feel it would be appropriate to give further comment at this time."

Calls to Huang's company were not returned.

The direct impact of the move is securing the future of the franchise, which has been in a minority ownership flux for the last couple years as it loses millions in attempting to build a championship-quality team around James. It will not only mean an injection of capital but will open the Cavs to business in China. The move, which has been kept mostly secret in America, is being supported by the NBA as they have encouraged development in China.

Read On

This article, from a Cleveland newspaper that obviously like to see LeBron James stay in Cleveland, talks about the impact that Chinese ownership could have on James and his decision on whether to stay in with the Cavaliers or go to the Knicks in New York in 2010:

The other effect, which is surely the more interesting side to Cavs fans, is how vital this new link could be for James -- providing a huge tie-in with an economy James is eager to tap.

...

"You have to think globally," James said recently of his business interests. "I have a lot of fans in China and they're important to me."

James and Nike, by far his largest sponsor, have been on a mission to create a bond with the Chinese over the last three years in the run-up to the Beijing Olympics. James has made four visits to China, one with the Cavs as part of a preseason trip in 2007.

With basketball exploding in popularity among millions of young Chinese with exponentially growing buying power, James has targeted opportunities in the Far East to make the same kind of marketing impact in modern China that Michael Jordan had in the United States in the 1980s and 1990s. Only the market there operates on a dramatically larger scale.

As of 2009, there is no doubt that LeBron James is the best basketball player on the planet. I'm in awe of the guy. He's massive - 6 feet 9 inches, 275 pounds - yet he's the fastest player in the NBA and has the highest vertical leap. There's never been anybody like him before.



James won his first MVP award this year. He won Friday night's playoff game with a last second shot. And he's also studied a bit of Mandarin.

I can't imagine James can say much in Mandarin or that he's taking the language very seriously, but the simple fact that he cares at all about learning Chinese shows how seriously he takes his popularity in China.

James is twenty-four years old. No matter if you're in Cleveland in Chongqing or in Chengdu, it's going to be amazing watching LeBron over the coming decade.

An Admissions Officer's Dream

With the development of China's economy, American universities are seeing a massive influx of applications from Chinese students.

From The Washington Post:

It's an admissions officer's dream: ever-growing stacks of applications from students with outstanding test scores, terrific grades and rigorous academic preparation. That's the pleasant prospect faced by the University of Virginia and some other U.S. colleges, which are receiving a surging number of applications from China.

"It's this perfect, beautiful island of people who are immensely motivated, going to great high schools," marveled Parke Muth, director of international admission at U-Va.

A decade ago, 17 Chinese students applied to U-Va. Three years ago, 117 did. This year, the number was more than 800 out of almost 22,000 candidates -- so many that admissions officers had to devise new ways to select from the pool of strong applicants.

Chinese students' growing interest in U-Va. is partly a result of the school's outreach and strong reputation. But even some schools that don't recruit in China have seen a rapid increase in applicants.

Until fall 2007, the number of Chinese undergraduates in the United States had held steady for years, at about 9,000, according to the Institute of International Education, which promotes study abroad. But that year, it jumped to more than 16,000.

Experts say China's increasing wealth, fewer delays in obtaining visas and technology that makes it easier for Chinese students to learn about U.S. schools have helped fuel the boom. It shows no sign of letting up.

Read On

Globalization has made life easier for a lot of Americans. It's opened up doors for American companies abroad and allowed its citizens to buy products at bargain-basement prices. While there have certainly been drawbacks, Americans, on the whole, have had at least a fairly positive view of how globalization has affected their lives.

With globalization and its opportunities are a whole new set of challenges though.

I talk with Chinese students all the time. A huge percentage of them tell me that they want to go to the US to study. Chinese universities have very deep and significant problems. It makes sense that China's best students with the means to go abroad would want to get out of its university system.

A few years ago, going to America to study would've been a pipe dream for nearly everyone in China. But as China rises and more and more of its families have the means to pay for such an endeavor, this dream will certainly become more of a reality for Chinese students.

This increased competition abroad from Chinese students at American universities is one of the things that comes along with a more open and balanced world. It will make things more stressful for American students.

But America, being a largely meritocratic country, should embrace the idea that its universities should be filled with the best students. Even if those students come from China.

The Development to the West

As manufacturing hubs and economic powerhouses in eastern and southern China go quiet, the country is looking inward for growth.

From Reuters:

Xi'an, circa February, 2006 when I first arrived in China

SHENZHEN, China (Reuters) - Like a spreading ink blot, messy and uneven, economic growth is seeping inland from the coastal provinces that have been in the vanguard of China's phenomenal growth over the past 30 years.

The shift, which has rough parallels to America's westward migration in the 19th century, has the potential to narrow the noxious income gap between China's vast, neglected interior and a relatively well-off seaboard that has hitherto attracted most of the investment by the central government and foreign firms.

...

"Although shrinking global demand will affect consumer confidence in export-oriented coastal regions, the majority of consumers in interior regions will be much less vulnerable to the slowdown in exports and property markets," said Qu Hongbin, chief China economist for HSBC.

...

"The distribution of scores is a reflection of growth potential identified by businesses. Robust development in the past decade was concentrated in the east, leaving large untapped opportunities mainly in the western and central areas," commented Sherman Chan, an economist at Moody's Economy.com in Sydney.

So it is that the fastest-growing part of China has been resource-rich Inner Mongolia. Between 2003 and 2008, the region enjoyed average growth of 19.7 percent a year.

Mainly rural provinces like Inner Mongolia, where agriculture accounts for over 70 percent of total employment, certainly have a lot of ground to make up. The ratio of urban to rural income per person rose in China to a record level of 3.3 in 2007, government figures show.

Worried by the yawning wealth gap, Beijing launched a "Go West" development policy in 1999 that has gathered momentum since President Hu Jintao took power in 2002. Both Hu and Premier Wen Jiabao cut their teeth running poorer inland provinces.

Read the Whole Article

Growing up in Kansas City in America and living in Xi'an in China, I'm very familiar with how second-tier-ish, land-locked cities operate.

During the recent good times of globalization, they're not quite as heady as more coastal cities. But during the downturn, they don't have as much to lose as the places whose growth had been based on unsustainable circumstances.

To illustrate this point in America, I'm posting a chart I saw the other day from Mainstreet.com that ranked the "happiest states in America" right now during the credit crisis. The states that top the list might be a bit surprising to those who think every person living in "fly-over America" dreams of one day going to the big city:

So while the interior of America didn't grow like some of the other parts of the country during the boom years, it turns out that its economy and its people weren't as addicted to the irresponsible practices that people in other parts of the country got drunk upon during the roaring 00's.

I don't have any neat charts or graphs for China in this regard, but the principle is the same.

Xi'an is a massive city that is growing incredibly quickly by western standards. But compared to the break-neck pace of growth in other parts of China, Xi'an's growth is relatively "sustainable" by Chinese standards.

Xi'an's housing/apartment prices never got out-of-control like coastal cities' (although Xi'an's commercial real estate got a bit crazy) and it's manufacturing isn't as based upon export as other coastal factory hubs'.

When studying abroad in the Netherlands in 2003, I remember meeting some American hippie at the hostel I was at when visiting Amsterdam. He was from New York City. During the course of our conversation when I told him I was from Kansas City, he said, "Kansas City, Jesus. What is it like living there?" I didn't really know how to respond to this ridiculous question. It reeked of the "I don't understand how people don't live in NYC" kind of thinking. I don't remember what my answer to the question was, but I'm sure it was rather condescending and mocking in tone.

While this whole post has been ragging on huge cities and the runaway growth they've enjoyed over the past decade, one day, I would like to get out of living in second-tier cities. I see the value of living in major cities.

Going forward, Qian and I are very open about where we'll spend our lives. In America, places in the west like Seattle, Portland, Denver, or places in California all sound interesting to us. And in the future when/if we come back to China to live (who knows in which country we'll spend most of our time), I'd like to spend some time in Shanghai or Beijing or maybe even Chongqing.

No, I'm not opposed to big cities. But I do get a bit defensive about cities in the interior of both the US and China. While they may not be as exciting, as fast-paced, or as great economically (during good times), there is definite value in the way life is lived in these places.

Texas-Style Xenophobia

Last week, a Texas State Representative made herself look pretty damn stupid.

From United Press International:

TERRELL, Texas, April 9 (UPI) -- A Texas legislator defended her comment that Asian-descent voters should adopt names that are "easier for Americans to deal with."

Republican state Rep. Betty Brown of Terrell, 32 miles east of Dallas, said through a spokesman her comment was not racially motivated but was an attempt to solve problems with identifying Asian names for voting purposes.

During a hearing Tuesday night, Brown responded to testimony from Ramey Ko, a representative of the Organization of Chinese Americans. He had said people of Chinese, Japanese and Korean descent often have problems voting because their legal transliterated name is often different from their common English name used on their driver's license and on school registrations, the Houston Chronicle reported.

"Rather than everyone here having to learn Chinese -- I understand it's a rather difficult language -- do you think that it would behoove you and your citizens to adopt a name that we could deal with more readily here?" said Brown, whose comments were posted on YouTube Thursday.

Read On

Over the weekend, Ms. Brown rethought her comments, or at least her political future, and apologized.

While it's easy to say that Ms. Brown is an ignorant, minority view, the fact of the matter is that I'm sure there are a great deal of people who agree with her. Brown's spokesman said that 90% of Texans want a voter ID law, an idea which, to me, reaks of being anti-minority. Whether that number is correct or not remains to be seen. 90% is a very high number. But even if the number is off, I wouldn't be surprised if Brown really was speaking for her constituency in at least some sense.

America is the melting pot of the world. It has a black president. But to think that all corners of the country are progressive and colorblind is far from true.

This issue of Asians changing names hits very close to home for me. My fiancee, 耿倩, is going to be changing her name later this year after we get married. While she's pretty sure what that name will be, what she's going to go by on a daily basis is open to some debate.

耿倩 in pinyin (romanized Chinese) is Geng Qian. "Geng" is the third tone and "Qian" the fourth. Chinese family names come first and given names second. So Geng is the family name, Qian her given name.

Chinese people call her either Geng Qian, Qian, or Qian Qian. Qian Qian is a kind of cutesy nickname that friends or family call her.

I don't call her any of these things. I call her "Jackie." Jackie is the English name she chose when she was in high school. There was no particular reason why she chose that name. Just something she liked. She's not sure, but it may have had something to do with Jackie Kennedy and liking her. Jackie has never claimed to be a Jacqueline shortened to Jackie. She's just Jackie.

I met Jackie when working at an English training school. She was a Chinese English teacher and I was a foreign English teacher. In that environment, every Chinese teacher goes by their English name. No foreign teacher at that school knows any of the Chinese teachers' Chinese names. In fact, many of the Chinese teachers don't even know the other Chinese teachers' names. There's no real need to learn them.

So while I was teaching at the school, I worked with a bunch of Chinese people who I only knew by their English names: Kristy, Jane, Tiger, Doris, Bernice, and, of course, Jackie.

Seeing that my relationship with my fiancee was largely based out of the English training school environment we were involved in, I always referred to her as Jackie. I still do. In the two years we've dated, I've never made a concerted effort to stop calling her "Jackie" and to begin using her Chinese name. There just hasn't been any reason to. She fine with what I call her (I've asked) and so am I.

Being from Kansas City in middle-America, I figured that when we eventually go to America one day, she could just be Jackie. While I really like her Chinese name, we are already in the groove of using Jackie and I reckoned that it would just be easier for Americans to wrap their heads around.

Qian is actually a beautiful name. In terms of Chinese names/sounds, I think it's one of the best. To hear what it sounds like, click here. As you can see, it sounds kind of like "Chee" and "An" put into one syllable. To me, Qian sounds a lot better than some other Chinese sounds that I hear all the time. Sounds such as Dong, Wang, or Chang.

When back home this past Christmas, I had a conversation with my mom, Aunt, and female cousin. We were talking about "Jackie" when they asked me what her real name is. I told them "Qian." They all thought it sounded so great and that she should use that when she comes to America. I agreed that it is a nice name but explained that being spelled Qian, I could imagine infinite amount of mispronunciations and difficulties with the name. I wasn't sure if it would be worth the effort. The family members I was talking with, a group of relatively conservative midwestern women, all assured me that it isn't too difficult and that they loved it.

This was pretty surprising to me. I previously had thought that they'd be the type of people with the biggest problem with the name. But in fact, they gave Qian a ringing endoresement.

I told Jackie about the rousing response Qian got back home. She was pleased to hear that. She said, "Well, why don't I just use that when I go to the US?" I had no problem with this and have no problem with it now. Although I'm sure that her transition from Jackie to Qian, if she does indeed go forward with it, will be hardest for me more than anyone else seeing that she's been Jackie to me for the past two plus years.

I'm fine with going for it if it is indeed what she decides to do upon going to America.

If anyone is still reading this ridiculously long post, I'd be curious what you think about Qian Jacqueline and what name she should go by in America. Will Qian be too much trouble for Americans who have no idea the Q in Qian should sound like a CH? Will this be a lot of headaches for her? Would it be better for her to make Betty Brown proud and just be Jackie?

No matter what she does, I hope that Jackie/Qian can have as little contact with ignorant people such as Betty Brown as possible. People who think that being "Qian" as opposed to "Jackie" is somehow un-American don't seem to, in my opinion, have a very good understanding of what The United States of America really is.

Economic War Games

The financial crisis is causing the US to rethink just about everything it does. One of the most important areas being reconsidered is its planning for future wars and its best options for combating future enemies.

From Politico (h/t to The Automatic Earth):

Photos from The Daily Mail and AP

The Pentagon sponsored a first-of-its-kind war game last month focused not on bullets and bombs — but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis.

The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants.

“It felt a little bit like Dr. Strangelove,” one person who was at the previously undisclosed exercise told POLITICO.

But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies.

Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community.

In the end, there was sobering news for the United States – the savviest economic warrior proved to be China, a growing economic power that strengthened its position the most over the course of the war-game.

Read On

Is there even any question at this point in time as to whether China is a superpower or not? It looks like China may even be able to overtake the country that's been the superpower for the past twenty years - the United States.

The Politico article goes on to talk about the lessons learned from the exercise and some reasons why the Chinese were, in fact, the winners of the simulation.

At the end of the two days, the Chinese team emerged as the victors of the overall game – largely because the Russian and American teams had made so many moves against each other that they damaged their own standing to the benefit of the Chinese.

Bracken says he left the event with two important insights – first, that the United States needs an integrated approach to managing financial and what the Pentagon calls “kinetic” – or shooting – wars. For example he says, the U.S. Navy is involved in blockading Iran, and the U.S. is also conducting economic war against Iran in the form of sanctions. But he argues there isn’t enough coordination between the two efforts.

And second, Bracken says, the event left him questioning one prevailing assumption about economic warfare, that the Chinese would never dump dollars on the global market to attack the US economy because it would harm their own holdings at the same time. Bracken said the Chinese have a middle option between dumping and holding US dollars – they could sell dollars in increments, ratcheting up economic uncertainty in the United States without wiping out their own savings. “There’s a graduated spectrum of options here,” Bracken said.

Indeed, the US is in a precarious situation. It's gambled its future on backing up toxic assets and saving its failed financial systems. It now is married to possible adversaries because those countries are financing its "economic recovery" packages.

Seeing how poorly the Pentagon has handled the wars its been mired in so far in the twenty-first century, I'm concerned about how my country would conduct itself if the world economy continues to tank and countries across the globe get increasingly desperate.

Sure, W. is no longer the president. But I haven't seen profound change from Obama and the way he's running things. From the guy in charge of the financial systems to the guy in charge of the military, Obama seems to be very conventional in who he's chosen to help him run the country.

I admit that things are getting better with Obama as president. But to say that the status quo has been completely changed from the Bush presidency just doesn't seem to be true to me. And in the end, the president can only do so much as one person. Even if Obama is leaps and bounds smarter than Bush, if the people around him are the same people who helped run America into the ground with the previous president, well, that's a serious problem.

The fact that these war games brought in such a wide variety of people and agencies shows that the battlefield in future conflicts will be exponentially larger than where soldiers or war vehicles rove. The institutions that Obama builds and that work for him will be the ones that determine the future of the US.

Obama and Hu at the "G2" Summit

The two most powerful people in the world met yesterday.

From AFP:

LONDON (AFP) — US President Barack Obama and Chinese counterpart Hu Jintao agreed to fight protectionism and work to improve military ties at their first face-to-face meeting in London on Wednesday.

Obama also accepted "with pleasure" an invitation to go to China in the second half of the year, the White House said after the pair met ahead of the Group of 20 summit.

The leaders agreed to "strengthen ties at all levels" ranging from the economy to fighting terrorism, and would expand consultations on "non-proliferation and other international security topics," the White House said.

"The two sides agreed to resume the human rights dialogue as soon as possible," the statement said.

A recent US Defence Department report warning of China's growing military power angered Beijing. China cut off military exchanges last year over the planned US sale of weapons to Taiwan.

But the statement said: "Both sides share a commitment to military-to-military relations and will work for their continued improvement and development."

Read On

As the Financial Times put forward, this week is all about the "G2," not the "G20:"

The meeting yesterday between Barack Obama and Hu Jintao, his Chinese counterpart, on the sidelines of the G20 summit had been described by some as "the G2" and marked the first encounter between the two men.

During the meeting, Mr Hu stressed China's commitment to strengthening macro-economic control and expanding domestic demand, the White House said. The two leaders agreed to work together to renew world economic growth, strengthen the financial system, and establish a "strategic and economic dialogue" group that would first meet in Washington later this year. The White House also announced that Mr Obama would visit China in the second half of the year.

But with China demonstrating that it now wants to play a much more decisive role in international economic affairs, their meeting may have also set the tone for the rest of the London summit.

While talk of an emerging "G2" ignores the increasingly multilateral basis of financial diplomacy, it does reflect the reality that, on an increasing range of international issues, little can happen without agreement between the US and China first.

...

"In my 16 years of covering China I have never seen the country approach an international forum in such a proactive way," says Dong Tao, economist at Credit Suisse.

"China has traditionally been passive on the international stage, being a listener rather than an opinion leader, but this time it's different. China wants to make sure [its] voice is being heard."

Read On

The Chinese media seems to have given approval on the talks.

From Xinhua News:

BEIJING, April 1 (Xinhua) -- The summit between the two presidents of China and the United States, the largest developing country and developed country, is well timed and bears special significance as the world is bogged down in the worst economic crisis in decades, analysts say.

On the sidelines of the G20 summit in London, Chinese President Hu Jintao and his U.S. counterpart Barack Obama held their first meeting Wednesday, focusing on actions to fight the devastating global financial crisis.

Many observers believe the summit came at a right time when the Obama administration just took office for a short time and the China-U.S. relations are to embrace a new start.

Pei Minxin, an expert at the Carnegie Endowment for International Peace, said "it is a positive sign for China and the U.S. to have a better start under the Obama administration, compared with the same period under President Bill Clinton and George W. Bush."

"Overall, bilateral relations have been proceeding in a stable manner despite a few rows since President Obama was sworn in January," Pei said.

"Obviously, both sides have a strong will to push bilateral ties forward towards a healthier direction...and a strong indicator of it is the unexpected success of U.S. Secretary of State Hillary Clinton's visit to China in February," he added.

As chief U.S. diplomat, Clinton initiated the judgement that "U.S.-china relationship is the world's most important of the 21stcentury."

Read On

Agreed upon at the talks were an increase in scope when it comes to US/China meetings and summits.

From The Associated Press:

WASHINGTON (AP) — The Obama administration said Wednesday it will continue high-level talks with China started under the Bush administration, but will only hold one per year while expanding the scope beyond economics to foreign policy.

Announcing the change, Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton said the first meeting in the new administration will take place this summer in Washington.

Former Treasury Secretary Henry Paulson began the high-level talks in 2006 during a time of growing tension over America's soaring trade deficit with China. American manufacturers charged that China was manipulating its currency value to gain trade advantages.

Paulson sought to use the talks to bring pressure on the Chinese to allow their currency to rise in value against the dollar, an effort that was only partially successful.

In the Bush administration, the discussions took place twice a year rotating between China and the U.S. The Obama administration has reduced the number to one and elevated the role the State Department will play in the discussions. Treasury and State now will share responsibilities for guiding the talks.

Administration officials said the changes were being made to broaden the discussions between the two nations. While the talks would only occur once a year, the administration plans to have that session take place only after extensive preparatory work by officials in both countries.

Read On

Although yesterday's meeting was a big show and surely lacked any hard-hitting substance, I'm happy to see that it went well. There is a lot of pressure on both sides to push the other. US/China relations, like they always are, will probably be the touchiest they've been in some time during the financial crisis.

Being vested in both countries, I hope that the two leaders can step up and be great leaders in terms of their balancing of this delicate relationship.

I wonder if Xi'an will be on the list of cities that Obama visits in China later this year. It would be quite the trip to see Obama here in Xi'an. While Xi'an may not be the most important or strategic city for Obama to visit, it does have the Terracotta Warriors!!1!



Bill, Hillary, and Chelsea came to Xi'an in 1998. They visited the terracotta warriors, spent some time in a poor Shaanxi village, and spoke from atop the South Gate of Xi'an's impressive Ming Dynasty City Walls.

President Obama, Mark's China Blog officially welcomes you to Xi'an.

Premier Wen Speaks Out on US Reserves

China's attitude towards unquestioningly fueling America's debt by buying US Treasury Bonds is changing. As I chronicled a few days ago, in less than a month a lot has changed on this front.

Yesterday, the trend that I'd noticed continued to the top of China's hierarchy: Premier Wen Jiabao voiced his concerns about the security of China's partnering with the United States.

From The Los Angeles Times:

Photo from Bloomberg

Reporting from Shanghai and Beijing -- Chinese Premier Wen Jiabao voiced concerns today about the security of China's massive investments in U.S. government debt, even as he expressed confidence in the economic leadership of President Obama.

"To be honest, we are a little bit worried," Wen said, speaking at the closing press conference of China's annual legislative session.

"We have loaned huge amounts of money to the United States, so of course, we have to be concerned. . . . We hope the United States honors its word and ensures the safety of Chinese assets."

China is America's biggest foreign creditor. About half of China's estimated $2 trillion of foreign exchange reserves, the largest in the world, are invested in U.S. Treasury and other government-backed bonds. China's continued holdings and future purchases of American debt are seen as an important part of financing Obama's $787-billion economic stimulus plan.

Wen's comments, coming after a string of otherwise upbeat pronouncements about China's own economic prospects, were unusual in that he has rarely spoken up on the issue, nor in such frank terms. Analysts said they doubted the remarks were impromptu; rather, they may have been intended in part to send a message, perhaps to Americans in particular, about just how much they are reliant on the Chinese for their economic security.

"I suppose you could kind of view it as a shot across the bow," said Mark Williams, Asia economist at Capital Economics Ltd. in London.

Read On

Knowing how vital China is to America's economic and financial health, the Obama administration had a quick response attempting to quell Premier Wen's concerns.

From Bloomberg:

Photo from Politico

March 13 (Bloomberg) -- The Obama administration sought to ease Chinese Premier Wen Jiabao’s concern about the security of his country’s investments in U.S. government debt, reiterating pledges to cut the budget deficit in half in four years.

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said today.

Wen earlier said that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” he said at a press briefing in Beijing.

President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of U.S. debt sales to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. Investors abroad own almost half of all U.S. debt outstanding, and China last year overtook Japan as the biggest foreign buyer.

Read On

It's probably too early to say that China is going to stop buying US treasuries, but the rhetoric is certainly heating up.

But as the anonymous poster pointed out in my last post on this matter and the China/America (Chimerica) relationship I explored a couple a couple weeks ago, it is unlikely that China is going to do anything too severe to rock the boat. (Yes, the boat metaphor here is a double entendre.)

China needs the US as much as the US needs China.

Saying that, it seems reasonable to me that China would be concerned about its investment in America. The US has chosen to fight its debt problem with truckloads more debt. The US is betting its future on the trillions its hoping will somehow restore its economy.

China, in my opinion, should be questioning whether the US is in fact helping itself with all of the mountains of debt its burdening itself with.

As an American citizen, I'm gravely concerned about the health of my home country and the path its heading down.

Foreigners Still Not Studying Mandarin

Living in China, it seems to me like there are foreigners everywhere studying Chinese. It turns out that there are a lot here doing so, but not so many outside of China.

From Reuters:

Photo from Reuters

BEIJING (Reuters) - There has been a big rise in the number of foreigners learning Chinese, but still too few are studying the language, officials said on Thursday, worried this may affect efforts to soften China's global image.

China began setting up Confucius Institutes in 2004 to teach Chinese and they are now in 81 countries, but efforts to expand them are being hampered by too few teachers and poor teaching materials.

"At present, the basis for the studying or teaching of Chinese is very weak, unlike for English, French or Spanish, which have been popularized for hundreds of years," said Xu Lin, director of the Confucius Institute Headquarters.

Xu, speaking to reporters on the sidelines of China's annual meeting of parliament, said that in the United States more students studied Latin at middle school than Chinese.

"Though the desire to learn Chinese is very high, there is a lack of teachers and teaching materials," she added, referring specifically to the Confucius Institute.

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The fact that Latin, a dead (although in its own way very useful) language, is more popular than Chinese says a lot about how far Chinese has to go.

I believe Westerners believe studying Chinese is simply too hard. I know when I first came to China, I thought it would be impossible for me to ever really learn the language. Therefore, I put very little effort into my studies.

After being here for about six months, I realized that the language was not beyond my reach and began studying in earnest.

I've been studying Chinese for about two years. It is very difficult. I'm still not "fluent" by any means. I'm "conversational," but still run into trouble every day with my language skills. If I'd been studying Spanish and living in Spain for two years, I have little doubt that I'd be very "fluent" and would be at a much higher level than where I am with Chinese.

This difficulty level surely hurts Chinese when it comes to attracting interested students.

Saying that, there are a number of ways to study Chinese other than formally attending classes or going to the Confucius Institutes.

One method, chinesepod.com, has really taken off. From The Financial Times (h/t Peking Duck):

Ken Carroll is challenging a basic tenet in the global economy: that we all need to learn Mandarin Chinese to conquer the world’s largest market – but that learning Chinese is boring. Mr Carroll, a Shanghai-based language teacher turned internet entrepreneur, says that does not have to be so: he has pioneered a painless podcast method for learning Mandarin, and nearly a quarter of a million people worldwide are using it on chinesepod.com, which sends daily Man­darin lessons to iPods and Google phones around the world.

Chinesepod revenues have defied the global economic downturn, too, rising 250 per cent from December 2007 to the same month last year and climbing strongly again in January, according to the company. Study without suffering may sound too good to be true, but there seem to be plenty of people willing to listen to this particular siren song, especially now that more professionals are taking enforced vacations from the workforce, giving them time to learn new skills such as languages.

Investment analysts think education in China could even prove to be a recession-proof business. Bejing’s National Office for Teaching Chinese as a Foreign Language says 40m foreigners studied Mandarin last year. Chinesepod is riding that wave: with China’s economy expected to grow by 8 per cent this year – compared with a flat global economy – learning Chinese has rapidly begun to look like a clever investment.

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Chinesepod is very popular amongst foreigners living in China. I've heard a number of friends talk about their experiences using the site.

I believe Chinesepod's popularity shows just how much more popular studying Chinese is with business people or people living abroad compared to younger students living outside of China. Older people who don't have the time to formally study a language yet realize that learning Chinese is going to get them ahead are turning to means such as Chinesepod.

Personally, I don't use Chinesepod. I know I should. I have four hours of one-on-one lessons a week instead. It'd be great if I had the motivation to sit down and listen or study on the Chinesepod.com site a little bit every day, but I don't. When I eventually do come back to America, it'd probably be a good idea for me to get into Chinesepod.

That, and speaking more Chinese with Jackie. I still stand by the fact that having a Chinese significant other who speaks great English isn't much help with studying Chinese. It is just too easy for us to revert back to English. Jackie and I just don't speak Chinese with each other very well.

I'm hopeful that Jackie and I can speak more Chinese once we leave China though. I think it'll be a lot of fun speaking Chinese with Jackie in America when other people will have no idea what we're talking about. It'll be like our code language where we can say whatvever we want when we don't want others to understand.

From the strikingly low numbers of people studying Chinese abroad, I don't think we'll have too much trouble with people understanding what we're saying if we do resort to using Chinese as code language in the US.

America's Immigrant Brain Drain

Several days ago, a post I made entitled "Chinese Coming Back to China" sparked a mildly interesting back-and-forth between myself and anonymous commenters.

Just a few days after I made this post about immigrants leaving America, Kansas City's Kauffman Foundation released a report claiming that foreigners being kicked out of the country because of visa issues has little to do with skilled immigrants leaving America.

This report supports the view I espoused in the comments of my previous post. I said that America is losing its status as the beacon of ecomic prosperity and freedom to the rest of the world.

The following is the abstract from The Kauffman Foundation's report entitled "America's Loss is the World's Gain:"

Photo from virtualtourist.com

Immigrants have historically provided one of America's greatest competitive advantages. They have come to the United States largely to work and have played a major role in the country's recent growth. Between 1990 and 2007, the proportion of immigrants in the U.S. labor force increased from 9.3 percent to 15.7 percent. Approximately 45 percent of the growth of the work force over this period consisted of immigrants. Moreover, a large and growing proportion of immigrants come with high levels of education and skill. They have contributed disproportionately in the most dynamic part of the U.S. economy - the high-tech sector. Immigrants have co-founded firms such as Google, Intel, eBay, and Yahoo. And immigrant inventors contributed to more than a quarter of U.S. global patent applications.

Since even before the 2008 financial and economic crisis, some observers have noted that a substantial number of highly skilled immigrants have started returning to their home countries, including persons from low-income countries like India and China who have historically tended to stay permanently in the United States. These returnees contributed to the tech boom in those countries and arguably spurred the growth of outsourcing of back-office processes as well as of research and development.

Who are these returnees? What motivated their decision to leave the United States? How have they fared since returning?

This paper attempts to answer these questions through a survey of 1,203 Indian and Chinese immigrants who had worked or received their education in the United States and returned to their home country.

We find that, though restrictive immigration policies caused some returnees to depart the United States, the most significant factors in the decision to return home were career opportunities, family ties, and quality of life.

Download the entire report

I just skimmed the report right now. There is a lot in it. I'm not going to recap the whole thing. The abstract I just posted does a decent enough job of that. Download the .pdf of the article if you wanted to read all of the findings.

This report seems to debunk the anonymous commenter responding to my last post who said:

Funny how you read these articles about Chinese eager to go back to China, yet I have yet to meet one. There is what Chinese tell foreigners and there is what Chinese do -- they are rarely the same thing.

And, no, I'm not a China-basher. I lived there for 6 years. There are positive things about living there, definitely. But anyone who thinks they won't be upgrading their lifestyle in a fundamental way by moving from China to the US or Canada, etc., is ridiculously naive about China.

This commenter, an American I presume, is calling the Chinese who go back to their home country "ridiculously naive about China" for thinking that China might be an upgrade over America. That is quite a claim.

I believe that this commenter fails to take into account a number of things about Chinese culture which would give a Chinese person cause for wanting to stay in China, even if given the opportunity to stay in America.

The most obviously thing to me to be taken into consideration is family. The typical Chinese person's extended family structure is very different from the typical American's. Grandparents help raise children. Aunts and uncles look after nieces and nephews. Nursing homes are a foreign concept.

To have the Pacific Ocean in between a Chinese person and his or her family is not an inconsequential thing.

As the Kauffman Foundation reports, family considerations were an even stronger pull for Indians than for Chinese.

Also according to the report, 87.3% of the Chinese respondants believed that China provided them with better career opportunities than America. That is a staggering number. It's obvious that an overwhelming number of American-educated Chinese people see the US' rotting economy as a terrible thing to be trying to get into right now.

And although 76% of the Chinese respondents said visa issues weren't motivated to leave because of visa issues, that does not mean America's visa policy is enticing people to stay though.

Vivek Wadhwa, a researcher on the Kauffman paper from Duke University, penned an editorial in the Washington Post today. In it, he discusses the difficulties immigrants can face getting visas and green cards and how that comes back to hurt America:

When I started teaching at Duke University in 2005, almost all the international students graduating from our Master of Engineering Management said that they planned to stay in the United States for at least a few years. In the class of 2009, most of our 80 international students are buying one-way tickets home. It's the same at Harvard. Senior economics major Meijie Tang, from China, isn't even bothering to look for a job in the United States. After hearing from other students that it's "impossible" to get an H-1B visa -- the kind given to highly-skilled workers in fields such as engineering and science -- she teamed up with a classmate to start a technology company in Shanghai. Investors in China offered to put up millions even before 23-year-old Meijie and her 21-year-old colleague completed their business plan.

When smart young foreigners leave these shores, they take with them the seeds of tomorrow's innovation. Almost 25 percent of all international patent applications filed from the United States in 2006 named foreign nationals as inventors. Immigrants founded a quarter of all U.S. engineering and technology companies started between 1995 and 2005, including half of those in Silicon Valley. In 2005 alone, immigrants' businesses generated $52 billion in sales and employed 450,000 workers.

Yet rather than welcome these entrepreneurs, the U.S. government is confining many of them to a painful purgatory.

Read the Entire Article

There are obviously a lot things that need to change before America can again attract and retain the world's best and brightest.

Until then, it is very reasonable to think that, as counter-intuitive as it sounds, skilled Chinese people actualizing the dream of making it to America may find that communist China provides them a better life than America can.