Ma-lin

Hexcel: Value in the Honeycomb

I used to own the stock until a few weeks ago. I sold and then it went up a bit. I sort of regret selling it, since I had forgotten that it made windpower blades and was more concerned with the downturn in aerospace. But now I see that wind turbine blades are only 10 percent of its revenue. One other factor may or may not be relevant to its future value: the price of carbon fiber (at least for the radio control model boats I build) seems not to have fallen at all. If anything it has increased at the retail end. If there was glut of carbon fiber, we should expect to see the retail price falling. This has not happened yet. I am waiting for the next pullback in the market and then may buy Hexcel again.

China Sky One Medical: Response to Cabeza Howe

Cal, thanks for posting this. Too bad you did not do it a bit earlier (I sold my CSKI stock in a panic). I wonder what you have to say about their accountancy problems and the other issues raised by Cabeza Howe

R. Michael Jones: Shallow Ounces of Platinum Draw Deep Pockets

What happens to the demand for platinum when cars go electric? Will there still be a need for catalytic converters? Or are EVs merely a dream?

Is Governor Zhou a Closet Bernanke-ite?

I think that the explanatory power of this analysis is brilliant, but ultimately it does not answer the question why China decided to run a trade surplus. The conventional answer might be that it believe that this was the best way to raise the living standards of its people. Saving (ie, making sure that the value of exports exceded imports) seemed the best way to finance future investment in education, technology, etc. I believe, however, that there is a deeper, cultural reason. China, at least since the Han dynasty (206 BC-220CE), has almost always run a trade surplus. The economies of Rome and Byzantium were partially undermined by the excessive import of Chinese silk. From the Ming period onwards, exports of tea and porcelain resulted in trade imbalances with Europe, particularly with Britain. The Qianlong emperor's famous reply to a request from Britian to be allowed to trade was that since China produced everything its people required it therefore had no need to trade with Britain. The result, of course, was that the British turned to opium as the only merchadise that they could persuade the Chinese (illegally) to consume. The idea that buying from abroad is a bad thing still underpins Chinese thinking. And underlying this is a fundamental xenophobia expressed in Mao's famous dictum that the Chinese should exploit foreign ideas [only] for the benefit of the Chinese (yang wei zhong yong). The subtle (and not so subtle) protectionism practiced by the Chinese authorities hardly seems to diminish with time and is due, I am certain, to the historical baggage that the Chinese carry.

I believe that the only way this balance of payments crisis could have been avoided would have been through managed rather than "free" trade over the past decade. The US should have raised import duties commensurate with each increase in China-US trade surplus. Of course, this would have resulted in far slower growth for both countries, but it might have helped avoid the current crisis.

China's Graduates

1) I wonder whether it is really so difficult to start up a business in China. I have a friend who started a hairdressing salon without difficulty a few years ago. Ok, this is not Baidu, but most business people start small

2) This friend together with relatives has recently been down to Guangzhou and Shenzhen buying up furniture from bankrupt exporters and will market it in Ningxia (northwest China). I suspect that many others are make similar opportunities out of the current crisis in Guangdong--does this herald the beginnings of a shift away from export towards domestic consumption?

More Terrible Trade Numbers from China

Michael,

Although totally unschooled in economics, I am always enlightened by your well researched and and cogently argued commentaries on China's ecomony. However, I was somewhat shocked by the diatribe about emerging Asian artists in your final paragraph. Sure, there is a buble at the moment, which has inflated the prices of works by minor artists. But who is to say that some of the more original ones are not still undervalued compared with their Western counterparts? Zhang Xiaogang, for instance is still (I think) cheaper than a Damien Hirst. And what about Xu Bing (or don't you consider him emerging)? Do I detect a whiff of Euro-Americacentricity in your valuation of the merits of living Asian artists? Or are you a collector who is being priced out of the markets?