China's empty city of Ordos

Where does China's 8% growth really come from?

Having just read the Genghis Khan trilogy I am a big fan of inner Mongolia and the fall of the Chin empire. The unwashed Mongol hordes operated an impressive and ruthless military machines. Although not intellectual these books are an easy read. Took me a week to read all three (see below).

Back to the empty city - Genghis was never a "city man" showing a strong preference for the open plains. Perhaps this explains the empty city of Ordos.

There are some simple supply and demand issues with the "empty city". This is another example of the waste from China's stimulus package. When the money runs out there will be carnage.




Here are the books on the cheap for those who like a boys own story with a body count in the millions.










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"For all we may smile, you can still smell us"

This quote from Shi Yinhong at Renmin University is a good one and represents China's method of diplomacy.

I like this article in the latest Economist. China's role in Africa is interesting - are African countries seeing through China's smile?

The economics behind the smile are also well written. China needs people to like them - they have spent a lot of money convincing us. The more we like China the more we will buy from them and invest in China and the happier the Chinese people will be. Happy Chinese means the Chinese communist party will remain in power. Is the smile beginning to fade and the real China come through?

Copenhagen is the obvious case. China is now getting the bad publicity it deserves and can be seen from my previous Copenhagen post. China is papering over the cracks but the damage has been done.

This article is well worth a read.

From the charm to the offensive [Economist]

IF A single impulse has defined Chinese diplomacy over the past decade, it is its smile: near and far, China has waged a charm offensive. With its land neighbours, India excepted, China has amicably settled nearly all border disputes; it has abjured force in dealing with South-East Asian neighbours over still unsettled maritime boundaries. On the economic front, the free-trade area launched on January 1st between China and the Association of South-East Asian Nations is the world’s biggest, by population. China’s smiling leaders promise it will spread prosperity.

Farther afield, China has scattered roads and football stadiums across Africa. By the hundreds, it has set up Confucius Institutes around the world to spread Chinese language and culture. More than anything, the Beijing Olympics were designed to showcase gentle President Hu Jintao’s notions of a “harmonious world”. In all this, the leaders appear not simply to want to make good a perceived deficit in China’s soft power around the world. A more brutal calculus prevails: without peace, prosperity and prestige abroad, China will have no peace and prosperity at home. And without that, the Chinese Communist Party is dust.

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But the message of harmony will ring hollow abroad if it is secured by muzzling voices at home. Besides, there is now less goodwill to go around. A smile is fresh at first, but loses its charm if held for too long. One problem with China’s smile diplomacy, says the man who coined the phrase, Shi Yinhong of Renmin University in Beijing, is that China’s global impact—its demand for resources, its capacity to pollute—is so much greater than a decade ago. “ For all we may smile, you can still smell us,” he says.

That even applies in places, such as Africa, where enthusiasm for China was once unbounded. China has more than a presentational problem. For instance, it sends Africa both destabilising arms and peacekeepers, the one generating demand for the other. China’s manufactures destroy local industries. Many Africans resent Chinese firms’ deals with their unpleasant leaders and blame them when leaders pocket the proceeds. China’s clout makes a mockery of two guiding tenets of its charm offensive: relations on the basis of equality; and non-interference.

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Fear of the Dragon and the Economist

The economist always does a good job covering China. They are astute enough to know where all the action is.

China is now the world's biggest exporter and this will not change any time soon.

This article goes through all the old "overvalued" currency and "global balancing" stuff. Nothing new but a good summary.

Fear of the dragon [Economist]

MANY people start the new year by resolving to change their old ways. Not China. On December 27th Zhong Shan, the country’s vice-minister of trade, declared that China will continue to increase its share of world exports. Figures due out on January 11th are expected to show that China’s exports in December were higher than a year ago, after 13 months of year-on-year declines. China’s exports fell by around 17% in 2009 as a whole, but other countries’ slumped by even more. As a result China overtook Germany to become the world’s largest exporter and its share of world exports jumped to almost 10%, up from 3% in 1999 (see chart).

China and metal - playing the long game

It is my considered opinion that the West is underestimating China on a number of different levels.

If we want to talk superpower politics, then China has always been a superpower albeit one that has been slumbering for 60 years. Remember the last 100 years is a very short period in China's history. In 10,000 years communism will be a mere footnote.

China is playing the long game - it can afford to and has the confidence of thousands of years of civilisation behind it. In contrast the US is a little like the playground bully. The US is young, has grown up quickly and become fat, bloated without losing its arrogance. The US has no friends - merely those that want to be seen to hang out with the playground bully and hope for a few crumbs. China is more like the teacher, simply sitting back with a rye smile and watching the children fight it out on the playground and doing its own thing for the long term good of China.

Where am I going with this - a recent post EAFE Pro looked at China's recent buying of copper and aluminum. I knew such buying was taking place but was surprised at the sheer scale. So why? China is taking advantage of the global recession to buy cheap and stockpile. China knows it will need the metal eventually just to construct the buildings, machines and cars it knows it will need in the future.

Here is the remarkable figure that caught my eye.



These reflect massive increases in imports over a short period of time. Is this all down to the stimulus package? If you have to vast reserves then buying up commodities that you will need in the future is a decent use of the money. Politically this enables China to be even less reliant on Western mining companies.

If one was an investor one would have to consider whether shorting copper is the way to go. If Chinese demand falls will the price follow it or does China intend to keep buying at these brakeneck levels.

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Does learning Chinese lead to a good job in the US? No.

I have been following Ben Ross' blog since its inception. He is an interesting chap who provided excellent insights into living in China when he worked in a Chinese barbers - long story.

His discussion on what it means for a Westerner to learn Chinese and spend three years in China is interesting. I admit I probably fall into the "wow - you speak Chinese - you must be able to walk into a high paid job".

The problem I now see clearly is that there are so many native Chinese who speak excellent English so the average westerner will never really be able to compete however much they try to learn Chinese.

This is a great quote. To most of my friends the "spouse" bit would be more than enough encouragement.

Rather than a fortune and a new career, most expats seem to return home with little more than a thicker waistline, a prodigious collection of DVD’s, and possibly a new spouse.

Ben speaks a lot of sense and shows some natural ability as an economist as he argues the case why his friend is ultimately doomed. His bleakness is refreshing (to an economist).

Ok, So you learned Chinese…Now where’s that dream job??? [Ben Ross's Blog]

Earlier this week I received an e-mail from an American friend of mine who had recently moved from China back to the US. My friend had spent three years in the Middle Kingdom, taught English, studied Chinese, and even worked a “real” job in Shanghai for half a year, and had now been back in United States for three months. His Chinese was solid, as it should be for anybody who spends three years in China, and good enough to be used on an occupational level. In his e-mail, he explained the frustration he was experiencing trying to secure a job in the United States which could build on his experience in China.

“I thought learning Chinese would be a hot commodity when I got back, and didn’t expect it would be this tough to find a job,” he expressed.

His sentiments are not out of the ordinary. In fact, the post-China unemployment funk is practically unavoidable for former expats upon their re-entry to the Western World, even in times when the economy is healthy. Part of the funk is due to the natural difficulties in transitioning back to American life. However, these frustrations are often aggrandized by high expectations, which are predicated on a fallacy that seems to follow any Westerner who has spent significant time living in China. It usually goes something like this and comes from the likes of parents, grandparents, teachers, generally anybody who is in a natural position to give you advice:

“Oh, you’re learning Chinese? China is the world’s next super-power, you know. You’ll be in high demand when you get back home.”

(Notice how people who make these comments never seem to be in the position to make use of your services. Yet they are confident others will be lining up to do exactly that.)

Chinese people provide similar, unsolicited life coaching. The line I hear most is:

你会英文也会中文。你应该做生意 。 “You speak English and Chinese. You should start a business.”

(As if that’s all it takes.)

The funny thing is that most of the people dispensing this kind of advice have never actually been in the situation which would require testing it out in the first place. They’ve never been an expat in China. And they’ve never looked for a “China job” in the US. However, they have heard all about it in the news, and they all seemingly buy into the axiom that: China is the next world superpower, and therefore there is no better way to cash in than to study Chinese.

The simple fact is however, mastery of Chinese, no matter how good you are, is NOT a golden ticket to employment in the United States.* That is, of course, unless your career goals are purely linguistic in nature (i.e. Chinese teacher, interpreter, or translator). More often than not, expats who learn Chinese and return home, find their way back into the same career (or school) path they had before they ever left for China in the first place.

Big money, international trades, product sourcing…these dreams are all in the trajectory of the scores of Tom Joads who show up annually in the Middle Kingdom. Everybody comes to China with a plan to strike it rich. Rather than a fortune and a new career, most expats seem to return home with little more than a thicker waistline, a prodigious collection of DVD’s, and possibly a new spouse. While China certainly is the current land of opportunity, capitalizing on this fact is not simply a matter of learning the language.

Although Chinese may in fact be in high demand, what’s equally important is to factor in is the supply of Chinese speakers. According to the US census, in 2006 there were 2.5 million** people in the United States who speak Chinese at home. That’s more than any language other than English and Spanish. What this means is that not even counting the hundreds of thousands of American currently studying Chinese as a second language, there are already over two million Americans, who by virtue of growing up speaking Chinese, speak the language better than you ever will, regardless of how much you study. From international traders to insurance salesmen to delivery boys at the local chop suey joint, most of the “China jobs” in the US are filled by Chinese Americans.

On the other side of the ocean, English proficiency in the Middle Kingdom is spreading like SARS in a Chinese train station during Spring Festival. Every year Chinese universities are churning out millions (literally) of graduating English majors, a large percentage of whom don’t find jobs with their bilingualness either. Those that do, tend to start out in the 1000 RMB per month range, about 170 USD. In short, there is no bottleneck in communication between China and the United States. And in a capitalist world governed by the laws of supply and demand, there is little justification for hiring an American and paying him an American wage solely because he can speak Chinese.

That being said, it certainly is possible to create a career out of your China experience, but here are some points you should consider.

-A decent “China job” is best attained by using Chinese to augment a pre-existing skill set. While the language alone won’t procure much in the way of employment, Chinese should give a competitive advantage to individuals who already have existing qualifications such as an engineering degree, a background in biochemistry, or experience in the financial sector.

-There are a substantial amount of career-oriented positions available which will make use of your Chinese skills. The thing is, most of them are in China, particularly Beijing, Shanghai, and Shenzhen. If your goal is to base your career on Chinese, you should be comfortable with the idea that you’re going to be spending the majority of your time in China.

-In order to secure a job using your Chinese, you’re going to have to be pretty good. Basic conversational skills and “knowing the culture” aren’t going to get you squat. It’s difficult to pinpoint exactly, but you should be able to sit in on a business meeting, soak up the details, and contribute to the conversation without falling too far behind. We’re talking a pretty advanced proficiency level here. Being literate helps too.

-But most importantly, finding a good China job relies much more on your actual skill set than your language skills per se. This is where people tend to kid themselves and hide behind their HSK scores. If you’re a poor communicator, disorganized, or can’t create an Excel spreadsheet, these traits are going to hurt your chances at employment much more than your inability to properly pronounce the third tone. Regard the bulk of your China job search as you would any other job search which wouldn’t pertain to your China experience. Your Chinese language chops are the gravy.

Now all of this is not to say that learning Chinese is a waste of time. Learning a foreign language, especially one spoken by 20% of the world’s population is, provides access to a wealth of knowledge and experiences unattainable to monolinguals. The ability to speak Chinese will allow opportunities for personal and intellectual growth to which it would be impossible to attach any price tag. But in terms of paying dividends measured in annual salary, the rewards of learning Chinese will likely never exceed the time and effort put into it. If you do decide devote the time and energy to study Chinese, do so out of a desire to further your own personal curiosities and intellectual development, not under the pretense that it will directly boost your career. For that, you’d be better off getting an MBA.

*I am assuming the same would apply to Canada, Australia, New Zealand, or Western Europe, but since I’ve never lived in any of those countries, I’m going to limit my direct discussion to the US.

**I’m willing to grant a significant number of that 2.5 million speak a dialect other than Mandarin (Unfortunately the census lumps all Chinese dialects together). However, current trends in immigration indicate that a) Chinese immigration to the US continues to increase and b) the vast majority of recent immigrants are proficient Mandarin speakers.

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Asia Universities on the rise

Good article from IPE Zone.

Will Universities in the UK suffer as China develops into an importer of students?

Asia Moving Up World University League Tables [IPE Zone]

A while ago, I featured a World Bank publication concerning how to create institutions of higher learning. While there are still strenuous debates about whether creating universities with high international standing should be a goal for developing countries, there is no doubt that many Asian ones have made significant strides in competing with the best of the best in the world. Singapore has always been notable in that its highly educated workforce has been the envy of the region if not the world in propelling development via "human capital."

There is, however, a rapidly rising newcomer to the scene that you all know of - China. Aside from placing three universities in the Times Higher Education Top 100 (if you include Hong Kong, that is), the PRC has made it an objective to become a destination for students--an importer of them instead of an exporter. Talk about the only area where the Chinese are keen on more imports save for Western "dual use" technologies! [also the previous post on that point] While I still have some reservations about the Times' methodology, there is no doubting the expenditures Asian countries are putting into education for both national development and to attract fee-paying foreign students. Interesting stuff; perhaps the changing balance of educational prestige will help signal the advent of the long-awaited Pacific century:

On China:

China is now expanding its entire education system rapidly, from primary schools to research centres. It intends to become an importer rather than an exporter of students, threatening the business plans of many universities around the world that depend on Chinese students. In our work on these rankings, we have encountered big increases in the amount of research being published by Chinese academics. Not all of it is world class, but over time it is likely to improve, as is teaching quality in Chinese universities. There is certainly a stark contrast between China’s placing here and the very modest showing by India. No mainstream Indian universities appear in our top 200. As in 2008, India is represented by only two of the Indian Institutes of Technology.

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Economists are "cheapskates"

This WSJ article hits the nail on the head. Economists are notoriously tight fisted and are well known for being the academics who give the least to charity. Using economics undergraduates in "experimental economics" is also flawed due to the indoctrination that the suffer at the hands of academics such as myself.

It is interesting that the US AEA conference is held in the first month of the year when business could not be any slower thus keeping hotel prices down.

Genius.

I like this quote:

In questioning after the experiment, the sociologists found that for many of the economics students, the concept of investing fairly "was somewhat alien."

In China the propensity to gve "gifts" to visitors in inefficient. I wonder if things will change as the country develops.

Secrets of the Economist's Trade: First, Purchase a Piggy Bank [WSJ]

Academic economists gather in Atlanta this weekend for their annual meetings, always held the first weekend after New Year's Day. That's not only because it coincides with holidays at most universities. A post-holiday lull in business travel also puts hotel rates near the lowest point of the year.

Economists are often cheapskates.

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