M.R. Henderson

Krugman to China: Go Green or Pay the Price

Reading Krugman's column, I believe there is an argument to be made that it is irresponsible of him at this time to suggest "green" means by which rising global protectionism could be implemented against China. A China without growth could disintegrate into a larger polluter than it is currently.

I'm reminded of an essay that detailed how the Chinese might diplomatically outflank global protectionism (and specifically a US consumption tax) making use of "green" arguments. To level the playing field, as it were, I leave the link below.

sinocircle.wordpress.c.../

Krugman to China: Go Green or Pay the Price

Thanks for the update on Krugman.

However the world's current views will remain in history, the argument that the U.S. wiped out the native americans and the British used child labor should not be an indignant explanation for the destruction of cultures and the exploiting of childhood in 2009. I believe this goes for pollution, too. Not to mention the scale on which industry is now working. That said, of course the name of the game is push and pull, talk loud, talk soft, but it is also a strategy of moves within moves.

I would note a slyness to Krugman's actions in the face of a nation that uses diplomatic tactics not unlike a five year old throws temper tantrums.

The Death of the Asian Development Model

Would holding the currency steady aid the under performing factories that had a product to sell - yes. After some years the strong would survive. Would collapsing it help employment, well, yes, for a few months of growth. China has taken a middle road at this point, and unavoidably now the question asked should be who else has tried to appease all suitors at once. What year and when has this happened?

China Investor Update

To have China pay for expensive Brazilian deep-water exploration which no one else would pay for, can only open up cheaper supplies to everyone else. Even if China takes all the oil, it is oil they are not taking from somewhere else. This is clearly a win for Brazil, for China, only time will tell if they are spending too much.


On Apr 22 10:44 AM CautiousInvestor wrote:

> Chinese corporations and the state owned sovereign wealth fund are
> striking keen deals across the globe and and are securing long-term
> access to needed resources at bargain prices.
>
> The Chinese have what nobody else has at the moment: cash. This gives
> them tremendous leverage as does their willingness to strike deals
> with countries that have strained relationships with the US, e.g.
> Venezuela.
>
> They appear to be focusing upon oil and minerals, both essential
> to the Chinese economy. In the literature there is a debate of sorts
> whether these deals will expand supplies or simply give China secured
> access at the expense of other buyers such as the US, Europe and
> India.
>
> However it unfolds, China is doing whats best for China..........and
> I wish the US would follow its example.
>
>

China Investor Update

Regarding interesting articles, a (subscription) FT article on Chinese property (quoted here: sinocircle.wordpress.c...) has a comment I found interesting, that even if Chinese lending is being fraudulently diverted into dead mortgages, this will serve the purpose of shoring up demand in the near term.

Also, an article in the WSJ (online.wsj.com/article...) suggests Chinese bank regulators may retroactively ask banks to reappraise their short term loans, which have been leaking into stocks. If this happens, in the next few days and weeks there may be quite a bit of selling of Chinese stocks as these short term loans are repaid or reallocated out of domestic equities.

With exports still contracting - falling 17% in march - this is not yet bottoming. FXP, anyone?

China's Stimulus Effect: Bounce or Recovery?

can you point to any "farm land resident" financing programs? how are these working? the domestic consumption stimulation i see is through work units.


On Apr 20 01:14 PM huangthomas wrote:

> The impact of the current world financial crisis on China is mainly
> due to plummeting export to developed countries. The external demand
> is beyond Chinese control and it takes time to whip up domestic demand
> and consumption. Since export accounts for 20 to 30% of GDP growth,
> the GDP growth drops from official goal of 8% to 6 - 7% range is
> to be expected. Q1, 2009 GDP growth of 6.1% is still a healthy and
> respectable number. It always takes time for the society to adjust
> to a new situation. In a time like this, higher expectation is unrealistic.
>
>
> GDP number does very little to the unemployed, low-skilled migrant
> workers. There are 20 to 25 million of them. Chinese government carried
> out a series of social welfare programs, such as subsidy and financing
> for purchase of electric appliance, water heater, air-conditioner,
> bike, motor bikes.....etc. These benefits are only for the farm
> land residents to make them happy while waiting for the economy to
> recover.

China: Why It Can't Be a Global Leader

as a country brings the world move value, the value of its currency should rise. so trade is heavily manipulated here, with much of the current stimulus even going into export subsidies. this model looks good for a developing nation, sucking cash into the country. but it is unbalanced, and it will lead to other countries' resentment, inevitably. Already protectionist measures are being put in place targeting china.

economists have been running china, and it shows. unfortunately, they have continued to hold all the money in government - in state owned banks - holding back domestic consumption, creativity, innovation. the lack of domestic economy is now china's greatest weakness, and what it should aggressively seek to unleash. there is latent creativity here but it is focused on unproductive measures due to the lack of laws, police, and general stability. this is not japan. this is a country all its own, with many cultures interacting now, creating mini-melting pots all over the country... but which is going to have a very hard year, i believe, when the tail end of consumer drop off catches up.

and this is natural and good, and it will hopefully force the government to unleash the incredible entrepreneurial spirit and hunger for shopping that exists here.

Collapsing Global Trade: Alive and Well

On a Happiness Index: my father is a population health economist and sometimes we get into discussions on inevitably flawed papers that endeavored to examine things like love and happiness. While we can agree that we value above GDP things like universities and museums and nature preservation, after development begins, GDP is a precursor for these higher value items. I do not know of a study yet that quantifies these testaments to true wealth, and it seems there hasn't yet been serious advances in the methodology for assessing what in fact is happiness. Judging by the number of people who insist they are happy and break down crying after a bottle of tequila (or baijiu), it is no wonder GDP is still king. And while the idea of a rabid consumer is not pleasing, having one's salary go up enable us to pursue what we wish, be it happiness or otherwise. So there must eventually also be a statistic that is paired with GDP, potentially identifying its sources, sustainability, health, age, and present development, is not easy in our MTV world, I suspect, to convince a population what is in fact happiness.


On Feb 03 03:12 PM Larrysyr wrote:

> I read somewhere that money doesn't buy happiness - the person with
> $10 million is probably no happier than the person with $9 million.
>
>
> As an American who consumes, I have to say I have plenty of junk
> already. I'm not sure there's much I need to buy for a while, except
> for the necessary consumables like food and gas. And I can waiting
> until the plasma TV gets down below $200 before springing for that
> luxury.
>
> Most people I know are in similar situations. There haven't been
> any shortages or civil unrest (yet), and we seem to have plenty to
> feed, clothe, and shelter pretty much everyone. It's actually a
> relief to stop buying stuff - we're running out of room for storage
> at my house.
>
> Maybe we should create a happiness index and work off of that and
> forget about consumption-based measures like GDP.
>
> Just a thought.

Will U.S. Growth Beat China's in 2009?

Or will China continue to juice its stimulus package of export rebates by devaluing the RMB, and the rest of the world, fearful of depression, will not respond with tariffs but rather swallow, sinking deeper into debt, while China accumulates more savings and continues to expand?

Germany Is Fighting With Europe - Can China Be Far Behind?

It is rarely acknowledged in the press, or clearly elucidated, why the RMB should appreciate hand-in-hand with Chinese efficiency in so many export markets. In a simplified manner of speaking, as a country begins to be valued more by trading partners, the currency becomes more valuable, appreciating, making their goods more expensive. This creates sustainable development. China (and also Japan and others) have tried to pump the system for all it is worth by keeping their currencies weak, and while pointing a finger at a single nation does not work, hopefully the economic minds in the next US administration will point toward a basket of nations that must play their part in the global economy or risk undermining free trade. As far as free trade goes, if we are to rule out tariffs to respond to this type of "dumping", then what other options are open to us? WTO?

Chinese Stock Market Bottoms: What Should U.S. Investors Do?

The Chinese government has been buying heavily on the SSE. Will it catch on, as they hope, or will it be like the rally the US saw last spring? That is the question.

Should China Raise Wages?

There may be a few additional problems with increasing wages. It is very hard for China to enforce an increase in wages, especially given the current job environment. But more importantly, with the firing freeze on larger businesses, the number of bosses emptying the company bank accounts and vanishing jumped. Further measures that encourage local bosses to abscond are against the present interest. And while Beijing seems to like the idea of forcing the present pain onto the provinces, from the firing freeze for larger enterprises to the announcement that 3/4 of the stimulus be funded by local government, banks and businesses, without adequate chain-of-command, the effect could not only further accelerate this slowdown through bosses jumping ship, it could also reduce whatever effect Beijing's future authority has; it will certainly weaken whatever effect such proclamations could have had were they win-win situations for the provinces.

Commenting on giving away consumer items to people... One sentence I noticed today in Bloomberg, strikes me as a similar move, and one I like:

"Sichuan Changhong, a maker of television sets, surged 9.9 percent to 3.43 yuan in Shanghai after China's government said it will allow farmers in 14 provinces to buy selected household appliances at a discount in a move to boost rural consumption." (bloomberg, today)

Of course it may emerge that Beijing will force whiteware makers to swallow this discount, that the discount is non-material, or that discounted devices are broken, thus undermining the effort, but if China promoted properly a STEEP discount (issued through rebates) for 6 months to middle/low income rural residents, a lot of people might jump at the chance for a once-in-a-lifetime purchase.

China Continues Downward Revisions

With the ferocious, wealth-hungry, driven, overly abundant, creative population in china, especially in its government, there can be NO "stiff safeguards", as any rule is outmaneuvered in the provinces, and as far as Beijing dispatching accountants to "account" for the money spent, the creative accounting that goes might get a few of these Beijinger's richer, but construction is one of the more corrupt enterprises - even in the "West". So there will be many petty officials grown fatter and not much trickle through for the 1/4 that Beijing is willing to pay for this stimulus. KTV venues and their associated brothels will see a boost for sure - along with riots. There will be some more jobs, but enough? And really, it IS jobs that are of paramount importance to stability, because without jobs, domestic stability for a land with more men than women will require a war. So how do we create jobs with no fiscal chain of command, no laws, and many hungry very clever people???

Because no one in China has the guanxi to sit down with every regional money baron to convince them it is in their interest to spend in a time of deflation, if a stimulus is to accomplish its goal in China, the clever politician (or businessman) would find a way to sidestep this issue entirely.

One cannot issue checks to 1.3 billion people (or half that number). One cannot implement healthcare overnight to a people accustomed to being lied to all their lives. No one will start spending because the government tells them to.

One idea that occurs to me is to have a second round of export rebates that are not export rebates at all, but rather domestic resale rebates, making all these factories' items ridiculously cheap for six months if sold to the internal provinces; could this help spur the entrepreneurial chinese spirit to do the rest? There would be a bit of round-tripping, but with all the new apartments recently bought, there might be a few people willing to leave their old apartments and actually move into the nice ones, outfitting them, getting a taste of consumption while openning up housing to the lower classes...

mr. D.R., i had (and many, i'm sure have) the same idea with the federalist papers comparisons. China does need Beijing to consolidate power, but neither with fancy words nor with money. It's too risky to let the increasing incidence of pubic unrest grow because it had been growing at an increasing pace, and i believed the government stopped publishing statistics on public incidents, around when you arrived. You might look into the role the military played in america's state/federal struggles: which is the only way Beijing can arrest anyone these days - by sending their own people on a plane and having them return that same day. The roads and facades are built to american specifications, but just inside those starbucks doors, the entire system of thought and communication is very different from anything an english knows. Spend some time in a handful of 4rth tier cities drinking - the government's national pasttime - posing as an investor. Invite the local bank of china manager out to dinner - not telling him youre writing a book -,and bring a translator you trust (preferably a pretty young woman). see where the money goes. Or if you want to talk to retired government officials who know what is what, try the same at Chengdu's KTV's. If you want active local officials at their best, the province rated most corrupt in 2006 was Qinghai province. try just asking at the government office about the 2% investment rebate you get for starting a business: they will laugh and say the emperor is far away - or tell you a story. They nearly doubled the population of their capital city - on paper - to get more aid from Beijing, and they even put away all their audi cars and suv's, ferrying hu jin tao himself in a broken down mini tourist bus, when the leader of China came to visit in 2005. Pre-federal america has some stories like this, and all humanity shares the tendencies that in China are just more developed. While the Mao Dynasty china currently abides has made some strides, this may or may not be its greatest test yet.

China needs stability, and soon the solution may no longer be an academic exercise.

In the next six months we should know.

China: Will Rising Unemployment Cause Policy Missteps?

If those export rebates were instead domestic sales rebates to drop prices, the Chinese would do the rest; trucking that stuff out to the provinces and selling it to all those young people hungry for purchases (and they are hungry all across China); and with this rebate a one time deal, the young might well ask mom and dad, and fill those new apartments with all the gizmos they see in "Desperate Housewives", stop worrying so much about property and stocks. Might calm the property market, to get people invested in their home, not looking to flip it.

China’s Manufacturing Crisis: The Real Story

Everyone talks about Chinese savings, but the tragedy may be where they saved: what happens when it becomes apparent that the "banks" have invested this money in bust property schemes?


On Nov 07 09:28 AM www.rapidtrends.com/bl.../ wrote:

> Difference between China and USA from a consumer perspective is acutally
> quite huge. Chinese citizens have shown a respectable 40%+ savings
> rate, whereas US Citizens spend more than we make with a negative
> savings rate of around -2.5%.
>
> This alone is a massive difference.
>
> Weathering a storm while one has reserves built up is very different
> than entering a storm without anything to fall back on, worse, being
> the largest debtor nation in the world.
>