Tuesday 31 July 2007

Obstacles to taming the "Dirty Dragon"

H/T Time China for a post that makes reference to 4 obstacles to the greening of China. Time reiterate that the following list amounts to nothing more than saying that the entire problem is related to "corruption". I disagree with this statement.

China has already come on a remarkable journey in the last 20 years. The speed of development is bound to lead to teething problems and China is on a very steep learning curve. As incomes rise China's environmental record will improve. Corruption can be tamed. This however all takes time. China needs support to achieve its environmental goals. The 4 obstacles listed below are all valid however and whilst change will not be rapid (and certainly not as quick as the West would want) it will eventually happen in my opinion.

China has a lot of problems to deal with from food prices, creating jobs for millions each year, censoring blogs (like this one) and environmental degradation on a vast scale.

My feeling is that the environment was seen as the least of its problems although it is quickly moving up the list of priorities.

Ranking the Obstacles to Sustainable Development in China

Obstacle #1 The biggest obstacles are unrealistic economic goals defined in economic terms (GDP) which are then exaggerated at lower levels. Economic growth goals need to be relaxed, said Zheng. The development ministries such as the State Development Planning Commission, the State Economic and Trade Commission are much more powerful than the protective ministries such as the State Environmental Protection Administration (SEPA), the State Forestry Bureau (although some Chinese experts say that Forestry is more of a forest-exploiting than a forest-protecting agency.)

Obstacle #2 The second greatest obstacle to sustainable development is the private interest group-like behavior of ministries and local governments. This results in conflicting goals as each ministry and local government seeks its private advantage first and prevents a coherent policy from being implemented. This second obstacle is related to the weakness of law and the ineffectiveness of the central government in imposing policy upon different ministries and upon local government.

Obstacles #3 The third obstacle is the widespread corruption of Chinese government officials. This is closely related to obstacle #2 above. The perception of widespread corruption by government (that the government does not obey the law) probably also makes it harder to persuade Chinese people to comply with laws and weakens the authority of government generally.

Obstacle #4 The fourth obstacle is the poor quality of decision-making by Chinese government officials. This fourth obstacle is due to limitations in personal integrity, education and knowledge of many officials [Note: The Chinese term that expresses a person's quality (suzhi) is a blend of personal integrity, education, and general knowledge. End note] but also to the poor quality of the statistics they base their decisions on. Some Chinese academic say that the elimination of the social sciences from university curricula in the early 1950s (but making a comeback today) has resulted in very narrowly educated officials and scientists who don't understand the big picture. Premier Zhu Rongji's government in 1998 launched a campaign still underway to stop the widespread falsification and exaggeration of statistical data that local governments send to the central government.

Monday 30 July 2007

Blog Awards - "China Economics Blog" nominated

With only a couple of days left this is an impassioned plea to readers to VOTE. Winning is now a mathematical impossibility (that is not strictly true) as China Law Blog has it all sown up but a wee push will ensure this blog is not bottom and achieves a creditable finish :-)


Sunday 29 July 2007

There's a rat in the kitchen, what am I going to do?

Some how I missed this article. "China invaded by 2 billion rats" is a good enough story but when one also throws in some climate change, too much snake and owl on the menu and the likelihood that "rat" will soon be joining them and you get a blogger's goldmine.

The economics comes from all of the above. Demand from customers for snake means no snakes left to eat the rats - a classic externality. The demand from consumers for more goods and rampant materialism leads to greater CO2 emissions and hence climate change that may have contributed to the recent flooding. The Chinese government building the three gorges dam that cost billions so that it could be used to control the floods but may also have contributed to the increase in rats. Finally, the ability of the Chinese to substitute rat for other meat and for it to have a cost.

One point of clarification, it appears that what us Brits call mice, the Chinese call rats. What do the Chinese call rats?

This Guardian article is great - it goes straight for the economics. Forget the human misery, lets talk business.

'Rats' on the menu after China swamped by 2 billion rodents [Guardian]
The business management philosophy that one person's crisis is another's opportunity may perhaps never have been taken to such bizarre extremes.

A plague of 2 billion mice in central China was described just days ago as being so bad that it resembled a scene from a horror movie with roads and hillsides turned black with rodents.

But in a remarkable display of entrepreneurship, businessmen are catching, shipping and selling the eastern field mice, also known locally as rats, to the southern city of Guangzhou, where restaurants are reportedly offering rodent banquets to diners notorious for their unusual tastes.

According to Beijing News, businessmen from Guangzhou - the provincial capital of Guangdong - were offering 6 yuan (40 pence) for a kilogramme of live rodents.

The Guardian then decides to mention as an aside the fact that:
The infestation was caused by some of the worst flooding in 50 years in central China. In the past two weeks, more than 400 people have died, 105 are missing and more than 3 million have been forced to evacuate their homes as a result of the deluge.

Another externality (in addition to the eating of owls and snakes):
In the ensuing war on rodents, local people beat hundreds of mice to death. Some used ferrets, others so much poison that more than 1,000 cats and chickens were also killed.

Assuming that the cats were trained rat killers the use of poison would appear to be rather hasty.

Finally, forget the great wall of China, the great mouse wall of Hunan could be the next great tourist hotspot. Is £400,000 a lot? We need to get the Contingent Valuation guys on the job.
Hunan province is attempting to raise more than 6m yuan (£400,000) to build a 24-mile wall to prevent future mice invasions.

H/T: Treehugger - who conclude their article with a fine "economics" phrase.

Two Billion Rats Invade China: From Eco-Disaster To Exotic Delicacy
Rats are being sold in greater numbers at live food markets in Changde, at the western end of the lake. From there, animals make their way to un-distinguished plates in restaurants in neighboring Guangdong province. The government has denied the news, saying that bans on wild animals still stand. But Guangdong, the home of Cantonese cuisine, is known for its exotic taste for everything from turtles to sharks to cats. And in China, where there's demand, there's supply -- and vice versa.

China and the concept of "Quality Fade"

China Law blog have written an excellent review piece on the topic of "quality fade" - the idea that, for specific deals, the Chinese exporter will begin to decrease the quality of the goods supplied (by using cheaper inputs) so that margins are improved.

The definition given by Paul Midler is: "The deliberate and secretive habit of widening profit margins through a reduction in the quality of materials."

This is a cost of outsourcing and of course it is in some respects, the price the West has to pay if it wants cheap imports.

I have done some work on the relative quality of Chinese imports and exports looking at Chinese imports and exports of the same goods (intra-industry trade) with China's East Asian neighbours. The preliminary results suggest that Singapore and Malaysia have been increasing the quality of their exports to China more rapidly that China has been increasing the quality of their exports to these countries. This fits with the quality fade story but is very much a macro perspective and as has been pointed out, the absolute quality of China's goods are increasing in the main it is only for specific deals where "quality fade" becomes a problem.

I believe this is an interesting idea and worthy of more detailed research. The linked to article contains a good discussion of the relevant issues. The original text also includes some good comments.

China Quality Control: Darkness Before The Dawn

Very thoughtful article on China product quality over at the Knowledge@Wharton site. The article is written by Paul Midler, founder and President of China Advantage, which provides China outsourcing and supply chain management services. Paul is a Wharton MBA graduate, who has been living and working in China off and on for the last 15 years.

The article is entitled "'Quality Fade': China's Great Business Challenge." Its thesis is that the current emphasis placed on importers in preventing quality problems is misplaced. Chinese suppliers that want to play games with their product are well positioned to do so and it is very difficult for Western importers to prevent. Midler defines "quality fade" as "the deliberate and secretive habit of widening profit margins through a reduction in the quality of materials" and he sees this as pervasive in China, with no end in sight.

Saturday 28 July 2007

Is more US anti-dumping legislation on its way?

H/T Greg Mankiw.

At least the U.S Treasury can see some sense. What is the Senate up to? This is simple protectionism and should offend free thinking economists everywhere. This is short sighted in the extreme.

Treasury: Cannot support Senate currency bill

My bold and not all the text included here.

WASHINGTON (Reuters) - The U.S. Treasury said it cannot support a bill passed by the Senate Finance Committee on Thursday to give the U.S. government new tools to pressure China and other countries to adopt more market-oriented currency practices.

"It distances the U.S. from a multilateral approach and raises serious concerns regarding U.S. compliance with international rules governing anti-dumping investigations."

Passed by a vote of 20-1, the Senate Finance Committee's measure would allow U.S. companies to seek anti-dumping duties on goods from any country that maintains a "fundamentally misaligned" exchange rate after being formally cited by the United States.

Another provision would allow the Federal Reserve to intervene in global currency markets if one year of efforts through the International Monetary Fund and World Trade Organization also failed to result in reform of targeted currencies.

The Treasury said it recognized that members of Congress want to send a strong message to China through this bill and others under consideration and added that Treasury Secretary Henry Paulson would deliver such a strong message when he visits President Hu Jintao and other top Chinese leaders next week.

But Treasury said it cannot support the bill's approach and "continues to believe that direct, robust discussions with the senior Chinese leaders, not legislation is the best means of achieving progress."

Friday 27 July 2007

China Quote of the Day

Consider the following quote that relates to China's adoption of practices, language, technology and mathematics from the West and have a guess of its year of origin:

"If we let Chinese ethics and famous [Confucian] teachings serve as an original foundation, and let them be supplemented by the methods used by the various nations for the attainment of prosperity and strength, would it not be best of all procedures?"

Feng Guifen 1860.

See Ssu-yu Teng and John K. Fairbank, China's Response to the West: A Documentary Survey, 1939-1923 (New York Atheneum, 1963), pp. 30-35.

Later in the century Zhang Zhidong coined the phrase:

"Chinese learning as the base, Western studies for use".

The policy of "self-strengthening" from this middle 1800s has generally been considered a failure with many reasons given including Western imperialism and the incompatibility of Confucianism with the priorities of the modern state.

It is useful to contemplate on why things are different now - if indeed they are that different. Issues of quality and corruption are as relevant now as they were then. Moreover, trade and FDI between China and the West has reached record levels. This is really jsut a continuation of a trend started over 150 years ago.

See Chapter 5 of Roberts' "A history of China" for more detail about this period of Chinese history when the China and West first clashed economically and militarily.

A History of China (Palgrave Essential Histories) by J.A.G. Roberts.


Corruption in a Developing Country Context

From theGlobalist comes an excellent easy to read summary of corruption in a developing country. China's rapid growth will cure some of the excess but it worth reminding ourselves of the impact of corruption can have on the development process.

Corruption in a Developing Country Context

Corruption plagues every aspect of society and causes more substantial damage in developing countries. As Ngozi Okonjo-Iweala, Nigeria's former Finance Minister, observed in her Sabot Memorial Lecture to the Center for Global Development, corruption affects all walks of life including education, governance and hinders progress in developing economies.

Viewed in its broadest sense, corruption is simply the misuse of public office or public assets for private gains.

It is also the misuse of these assets in a way that creates an unlevel playing field and that makes people feel injustice has been done. Perhaps this is why the average citizen in any country, in fact all of us, feel so badly about corruption.

Manifestations of corruption

Corruption may be manifested in various forms, such as theft, fraud, bribery, extortion, request for kickbacks, nepotism and patronage. A distinction is often made between grand and petty corruption.

In the case of grand corruption, big businesses are seen greasing the palms of senior state officials to receive favors.

And in petty corruption junior civil servants may be enticed to receive side payments or bribes to facilitate administrative arrangements for their clients. The existence of corruption clearly indicates that something has gone awry. And it is indeed symptomatic of weak governance and, more importantly, weak institutions.

Good governance

Of course, the desired outcome is that of good governance — a situation in which public institutions are strong, and public resources and public goods and services are managed efficiently to address the needs of society.

In the past, some skeptics often provided a rational defense for corruption based on economic efficiency arguments. It was argued that bribes helped in lowering the cost of doing business, in clearing the market, in providing incentive bonuses, and in distributing monopoly rents from a single agent to other officials who collude in sharing a bribe.

Bribes might be efficient

For example, it has been argued that in an environment where there are restrictive or bureaucratic government procedures — such as burdensome customs procedures or difficulties in obtaining licenses — bribes could actually provide an efficient way of reducing burdensome transaction costs.

Similarly, in cases where a government needs to allocate a scarce resource to various private agents, a bribe payment may help the market to clear more efficiently by allocating the resource to the highest bidder.

Bribes could also be explained as a rational incentive bonus to public sector workers whose wages may be artificially depressed.

Damaging development

The problem with many of these arguments is that they point to the microeconomic efficiency of an isolated corrupt event without examining its long-run systemic impacts.

In the long run, widespread corruption often creates much larger negative effects which can hinder the dynamic efficiency of an economy.

Affecting the poor

In Nigeria and many other countries in Africa where we have struggled with this problem, systemic corruption has diverted resources, bottlenecks in paying taxes,corrupted values, and led to rent-seeking activities in place of productive ones.

While corruption damages a country’s development, what is not at all sufficiently understood is that, in practice, it is highly regressive and inequitable. This is simply because corruption ultimately is most vicious on the poor. This may occur in various ways.

First, poor households are likely to be excluded from public services which require grease payments since the burden of corruption (that is, the cost of a bribe as a share of income) for the poor is likely to be disproportionately large compared to that of wealthier households. In this sense, bribery acts as a form of regressive taxation.

Public service

Second, in instances when public service delivery is weak due to corruption, the poor tend to be heavily disadvantaged as they may lack resources to obtain private services (in private clinics or schools, for example).

Teachers and lecturers take bribes to pass children on exams. Education, which is the one way for the poor to open doors of opportunity, is perverted — and such means of upward mobility is closed to them.

Roads to nowhere

Third, there is evidence that in a corrupt environment, government spending tends to be diverted away from social expenditures (such as health and education, which benefit the poor) towards infrastructure projects such as "roads to nowhere" or electricity projects that do not function.

Such projects are heavily transactional, yielding contracts that lend themselves to bribes.

When the environment becomes purely transactional with little focus on policy, the impacts on the poor is devastating. In fact, in a corrupt environment, actions of ministers and civil servants focus heavily on transactions rather than policies. Ample evidence exists in Nigeria of the so-called "juicy government ministries," such as Works, Power, Defense, Agriculture and Water Resources, which have large procurement budgets each year.

Non-economic effects

Finally, in instances when infrastructure projects are financed, procurement fraud leads to inflated contracts which further divert scarce public resources away from competing pro-poor programs.

A sad thing is that corruption could have even more pernicious non-economic effects on a society.

Nigeria is still fighting

In Nigeria, prior to the recent reforms, the culture of impunity and corruption that crept in under non-transparent, authoritarian regimes was so pervasive that it had corroded the psyche and moral fiber of Nigerian society.

There was complete invasion of our moral and values system, reaching well beyond the economic sphere as illustrated in the corruption examples above. Despite a vigorous fight launched against corruption, Nigeria is still fighting these ills today. But it is by no means the only country in Africa struggling with these issues at present.

Editor's Note: This feature is adapted from the Second Annual Center for Global Development (CGD) Richard "Dick" Sabot Memorial Lecture given by Dr. Ngozi Okonjo-Iweala on June 20, 2007.

Tuesday 24 July 2007

Access to Higher Education and Inequality: The Chinese Experiment

This blog includes a series of posts and links to the subject of postgraduate study specifically "MSC Economics", "MSc Finance" and related degrees concentrating on the top Universities such as the University of Birmingham, London School of Economics (LSE), University of Manchester, University College London (UCL), University of Warwick, University of Bristol, University of Southampton, Exeter University etc. To this end a number of "University rankings" are provided.

The goal is for overseas students to spend their education investment wisely.

This blog is also concerned with the economics of China. With 4.9m graduates a year and a great deal of importance placed on education by parents in China this is an important subject.

This research paper combines the two interests of this blog:

"Access to Higher Education and Inequality: The Chinese Experiment"
IZA Discussion Paper No. 2823

University of Hawaii at Manoa - Department of
Email: xiaojun@hawaii.edu
Auth-Page: http://ssrn.com/author=327869

Ohio State University - Department of Economics,
Institute for the Study of Labor (IZA)
Email: fleisher@econ.ohio-state.edu
Auth-Page: http://ssrn.com/author=2127

Georgia Institute of Technology - School of
Email: haizheng.li@econ.gatech.edu
Auth-Page: http://ssrn.com/author=381193

Co-Author: LI SHI
Chinese Academy of Social Sciences (CASS) -
Institute of Economics, Institute for the Study of
Labor (IZA)
Email: shi.li@econ.hit-u.ac.jp
Auth-Page: http://ssrn.com/author=242901

Full Text: http://ssrn.com/abstract=996402

ABSTRACT: We apply a semi-parametric latent variable model to estimate selection and sorting effects on the evolution of private returns to schooling for college graduates during China's reform between 1988 and 2002. We find that there were substantial sorting gains under the traditional system, but they have decreased drastically and become negligible in the most recent data. We take this as evidence of growing influence of private financial constraints on decisions to attend college as tuition costs have risen and the relative importance of government subsidies has declined. The main policy implication of our results is that labor and education reform without concomitant capital market reform and government support for the financially disadvantaged exacerbates increases in inequality inherent in elimination of the traditional "wage-grid".

The following posts may be of interest:
Econphd Ranking of "Economics departments"

Ten Reasons Why You Should Study in Britain


Studying "Economics in the UK": General Links

Which UK University to study in? "Academic Ranking of World Universities"

Studying in the UK: Cost of Accommodation

World University Rankings: Rankings and text

"UK University Ranking": large city effect

Friday 20 July 2007

Poverty, inequality, and social disparities during China's economic reform

An interesting new paper from the World Bank.

The role of the World Bank in China is often perplexing. Why does China still borrow $1.3billion dollars a year from the World Bank when it has reserves of $1.3 TRILLION and why does the Bank continue to lend them this money?

This comes back to the question, is the average Chinese citizen benefiting from this massive trade surplus of over a trillion dollars. Is it being invested/spent wisely? I see problems ahead and this paper does a good job of highlighting some of them.

Poverty, inequality, and social disparities during China's economic reform
Summary: China has been the most rapidly growing economy in the world over the past 25 years. This growth has fueled a remarkable increase in per capita income and a decline in the poverty rate from 64 percent at the beginning of reform to 10 percent in 2004. At the same time, however, different kinds of disparities have increased. Income inequality has risen, propelled by the rural-urban income gap and by the growing disparity between highly educated urban professionals and the urban working class. There have also been increases in inequality of health and education outcomes. Some rise in inequality was inevitable as China introduced a market system, but inequality may have been exacerbated rather than mitigated by a number of policy features. Restrictions on rural-urban migration have limited opportunities for the relatively poor rural population. The inability to sell or mortgage rural land has further reduced opportunities. China has a uniquely decentralized fiscal system that has relied on local government to fund basic health and education. The result has been that poor villages could not afford to provide good services, and poor households could not afford the high private costs of basic public services. Ironically, the large trade surplus that China has built up in recent years is a further problem, in that it stimulates an urban industrial sector that no longer creates many jobs while restricting the government's ability to increase spending to improve services and address disparities. The government's recent policy shift to encourage migration, fund education and health for poor areas and poor households, and rebalance the economy away from investment and exports toward domestic consumption and public services should help reduce social disparities.

Inflation and interest rates - upward move likely

As China's rapid growth continues inflation is now beginning to rear its head. The solution - to increase interest rates.

What is interesting about this article is the statement from the governor of the central bank saying that China needs to slow investment so that China does not have "too many factories, cutting company profits".

This is remarkable. Econ101 economics would tell that competition leads to a zero profit condition - it firms are making supernormal profits then other firms enter the market. Is the governor suggesting protection for those lucky first movers? One problem is that profits do not always = jobs. If China wants to find jobs for its large population then protecting incumbents is not the way to do it. Moreover, preventing the building of factories will not necessarily slow inflation.

Sure, excessive investment in factories can lead to a serious hangover when the party is over. That is why banks need to have stringent lending policies (which was not the case in the run up to the Asian currency crisis in 1997/1998).

What is true is that inflation is becoming a problem with food prices driving the inflation rate up to 4.4% last month. Pork prices grew a whopping 60%.

What is the solution - the one suggested by Bernanke is to allow the currency to appreciate which would help China become "less export reliant". We have discussed this before - such a move has political ramifications.

See below for selected paragraphs from a Bloomberg article.

China Likely to Raise Rates This Quarter, Maybe Today[Bloomberg]

China is likely to raise interest rates this quarter to cool inflation and investment after the economy grew at the fastest pace in more than 12 years, a survey showed. Some economists expect an increase today.

The benchmark one-year lending rate will rise to at least 6.75 percent from 6.57 percent, according to 20 of 21 economists surveyed by Bloomberg News after the release of second-quarter data. One economist expects a 9 basis point increase. The deposit rate will probably climb to 3.33 percent from 3.06 percent.

Central bank Governor Zhou Xiaochuan wants to cool investment that threatens to leave the nation with too many factories, cutting company profits. The world's fourth-largest economy grew 11.9 percent in the second quarter and inflation rose in June to the highest in almost three years.

Inflation accelerated to 4.4 percent last month as food costs soared. Meat prices climbed 36 percent from a year earlier and the cost of pork jumped 60 percent because of a pig shortage.

Record trade surpluses are pumping cash into the economy and have pushed the nation's foreign-currency reserves to a record $1.3 trillion. China exported $112.5 billion more than it imported in the first half, up 84 percent from a year earlier.

Federal Reserve Chairman Ben S. Bernanke said yesterday that faster currency appreciation would help China's economy to move away from being ``too oriented towards exports, not enough toward home markets.''

Sunday 15 July 2007

Water Pollution in China

An excellent source of information and data on province and municipality water pollution including mapping capabilities. Data from 2004-2007.

China Water Pollution Map

Link also added to the sidebar.

Update: Today's PlanetArk have an article linked to my initial post. This article highlights how bad things of got - the Kuznet's curve literautre would state that China will eventually reach a per capita income turning point from which point things begin to get better - there are signs of this happening in China but "tipping point" issues need to be considered here. If the underground water sources are polluted they may remain so indefinitely. Equally, desertification and climate change may mean water problems get worse over time.

This is one race I would not like to take part in.

Guangzhou Mayor Leads Mass Swim in Polluted River

GUANGZHOU - Leaders of the southern Chinese city of Guangzhou led thousands in a "swimathon" across the Pearl River on Sunday to trumpet its recent cleanup -- at a time of mounting water pollution crises across the country.

Guangzhou Mayor Zhang Guangning fired a starter's gun before leading more than 3,500 people in a much hyped swim across the river, China's third longest, whose lower reaches had been seriously polluted by rapid industrialisation.

The swim, an annual event, was abandoned in the 1970s because of the chronic pollution and resurrected only last year.

Years of promoting economic growth at almost any cost have taken their toll of China's environment, though growing rural discontent caused by dirty water and other pollution has pushed Beijing to promote cleaner growth.

A state media website quoted Zhang as saying the aim of the mass swim was to "make the local residents become aware of the importance of pollution control."

A government report released in May said pollution at the mouth of the Pearl River delta was "extremely severe," and that 8.3 billion tonnes of sewage, much of it untreated, was flushed into the province's coastal waters last year, a 60 percent jump from 2001.

Sunday's 800-metre swim was meant to hail the success of recent cleanup initiatives including new sewage treatment plants -- but some swimmers weren't convinced.

"The water really stinks over there," said one participant surnamed Zhao, who rinsed his mouth with a freshwater hose at the finish. "You can see. The water's black," he added.

Ma Jun, a leading environmental campaigner and water pollution expert, said water pollution was worse in other parts of China. "In many other cities, the water quality is much worse ... The Pearl River is one of the cleaner rivers," Ma said.

Several large freshwater lakes including Taihu Lake were recently blanketed with toxic green-blue algae, feeding on effluent discharged from nearby farms, homes and factories. Millions in nearby Wuxi city had tap water cut off as a result.

Underground water reserves in 9 out of every 10 Chinese cities are now polluted or over-exploited, according to the State Environmental Protection Administration.

Thursday 12 July 2007

"No flies on me": How much is a dead fly worth at the local flea market?

As an economist, the pricing of odd events and objects is always of interest. This morning's article on China's attempt to create a market in dead flies in a particularly interesting one.

The district of Xigong is paying 1,000 Yuan or £65 for 2000 dead flies. Some have argued that this is an inefficient use of public funds and that this is a relativlty high price to pay.

The question is how much effort does one have to put in to catch and kill 2000 flies? I expect with some strategically placed fly paper and some rotting meat for bait, this could be acheived with relatively little effort. In fact surely it will not be long before fly farms are being set up with the express aim of breeding flies to be sold for cash at the local "flea market" (someone laugh please).

Would there be a knock on environmental effect? What do flies do that is useful just in case there is another potential "Sparrow-Locust" diaster.

Echoes of Cultural Revolution as China becomes a 'no-fly zone'
It's a bad time for cockroaches, flies, rats and other vermin in China. With the 2008 Olympic Games in Beijing nearing, hygiene has forced its way on to the national agenda and improving China's image for cleanliness has become a national obsession.And collecting dead flies can earn you good money.

A suburb in central China's Henan province has set a bounty on dead flies in an attempt to promote public hygiene. The district of Xigong, which is in the city of Luoyang, paid more than 1,000 yuan (£65) for about 2,000 dead flies on 1 July, the day it launched the scheme with the aim of encouraging cleanliness in residential areas.

And in April, a Beijing restaurateur, Guo Zhanqi, said he would buy flies for two yuan, about 13p, each to help clean up the city for the Olympics. Mr Guo is giving cash to anyone who presents him with the dead insects.

"No flies, new Beijing. No flies, great Olympics." This is Mr Guo's slogan, a clever take on the Beijing Games slogan in Chinese.

"There were always a mass of flies around the entrance to my restaurant, and no fewer inside. It was extremely disgusting," Mr Guo, 60, told the China Daily. "Buying flies is not my ultimate purpose. I want everybody to start killing flies."

The Luoyang payment scheme is being given national coverage because it is the first of its kind in a city of 1.55 million people which is striving to earn the title of "state-level hygienic city".

"My colleagues and I believe it is the best way to push residents to do more for their living environment," a local spokesperson, Hu Guisheng, said.

However, some locals feel public funds are being misused and have questioned the wisdom of paying 0.5 yuan (3p) per insect turned in. The campaign in Luoyang has prompted a lively debate on the internet and one blogger said that although the office clearly was acting with good intentions, the action itself had made the district a laughing stock.

"The key point is the government should encourage residents to clean up the environment so that no flies can live there, instead of spending money on dead flies," the blogger said.

The forthcoming Olympics, which start at 8pm on 8 August 2008 (eight is a lucky number in China), have led to all kinds of ground-breaking initiatives in the capital. There are efforts to stop people spitting, littering and queue-jumping and taxi drivers are being told to learn English. Billboards advertising overtly capitalist pursuits are disappearing from the city.

The anti-pest campaigns are very much in the mould of Chairman Mao Zedong's campaign against the "Four Harms" in the 1950s, which targeted rats, sparrows, flies and mosquitoes. Citizens were given strict instructions to kill them and the campaign became famous because the efforts to control the vermin involved banging pots and pans to scare sparrows into flight and have them eventually drop to earth dead from exhaustion.

Sparrows were eventually rehabilitated because without them, locusts and other farm pests thrived and were wiping out thousands of acres of agricultural produce.

Education as an Export: The Benefits of Overseas Students

Now this years students have graduated more and more are looking to extend their education to gain a postgraduate qualification.

Given the increasing popularity of MSc programmes the bar is being raised and other students may also feel that in order to differentiate themselves from the growing body of undergraduates that a further qualification is required.

[For MSc Economics and MSc Finance programmes scroll down the side bar for a whole series of links and information for prospective MSc students]

The UK has always been a top destination. Overseas students inject £3.74Billion into the UK economy each year. Moreover, our economy also benefits from those highly qualified students that decide to stay and pay taxes in this country.

Today's article from the Independent discusses the gains further. My bold. I tend to agree with the sentiment of this article - in the face of increasing competition from Europe for the provision of English taught courses we do need to look at the cost structure.

We all gain from foreign students

Britain is a magnet for overseas students. They flock to our shores because British universities offer high-quality courses in English, a reasonable level of student support and degrees that carry global cachet. Our share of the overseas student market has fallen but is second only to the USA.

The big question is whether we will continue to attract overseas students, given the competition from countries such as Australia (cheaper) and Germany, which doesn't charge overseas students tuition fees. Today's report by Bahram Bekhradnia from the Higher Education Policy Institute, "The Economic Costs and Benefits of International Students", says we need to think very hard about whether to charge lower fees to overseas students.

That is because students from abroad bring more financial benefit than they take. Bekhradnia calculates that overseas students inject £3.74bn into the economy in tuition fees and spending. That makes them a bigger export industry than, for example, alcoholic drinks, textiles, clothing, publishing and even our world-beating cultural and media industries.

Moreover, this injection into the economy has a multiplier effect: money paid in fees goes largely to fund salaries of university staff, and that money is ploughed back into the economy. Also, students often stay on after graduation to work in Britain, providing a further boost.

Such a significant industry needs nurturing, the report suggests. Can the UK maintain its share of overseas students as other countries begin to use English as the language of instruction and market themselves more aggressively? Bekhradnia clearly believes that British universities might begin to struggle. But they can't be expected to subsidise overseas students from money they receive from the Higher Education Funding Council.

So the answer would be an explicit subsidy from taxation. A government that tried to persuade the public that this was in their interests would be brave indeed. But we hope the new Chancellor of the Exchequer will read the report and ponder its message. Who knows: if the public becomes more economically literate with the introduction of lessons in financial management, the British might be persuaded that it is in their interests to charge foreigners lower fees.

The FULL REPORT should be available here in the near future.

The following posts may be of interest:
Econphd Ranking of "Economics departments"

Ten Reasons Why You Should Study in Britain


Studying "Economics in the UK": General Links

Which UK University to study in? "Academic Ranking of World Universities"

Studying in the UK: Cost of Accomodation

World University Rankings: Rankings and text

"UK University Ranking": large city effect

Wednesday 11 July 2007

"A History of China" by J.A.G. Roberts

A new "book of the week" after 3 months. No paid reviews done on this site (or at least none have ever been offered).

As a partial break from economics I am currently half way through:

A History of China (Palgrave Essential Histories) by J.A.G. Roberts.

Whilst only around 350 pages long it still manages to capture all the important stages of Chinese history in appropriate detail. The beauty of this book is that it is academic in nature and yet highly readable. It could even be considered a page turner. The extensive but unobtrusive use of endnotes is great for the academically minded.

I am just entering the Ming dynasty on page 112 after the fall of the Mongol empire and the Yuan dynasty.

For (sad) economists there is plenty in there - it is perhaps not surprising to learn that in many cases the fall of a dynasty was preceded by economic disaster. Land reform, military expenditure, trade, monopoly rents and taxation are common themes. Now I bet you can't wait to read it....

Even the water is counterfeit

After hearing so much about IP theft and all round piracy in China it was interesting to read that counterfeit water is everywhere. The writer of this article does a good job setting the scene before launching into a full scale rant.

The bottom line is where there is a profit to be made it will be made. Once water begins to be faked you can bet that much everything else is as well.

H/T Time's China blog.

Now it's Fake Water
This morning, I heard the news that half of Beijing’s bottled water is counterfeit. I was horrified. It seems that illegal factories fill the used plastic bottles from the tap or with perfunctorily filtered water. The bottle tops and tape that they use to seal the bottle look identical to the genuine ones. The bottles aren’t sterilized and the number of mold fungi and e. coli bacteria that have been found in such water can easily make drinkers sick. An industry report quoted by Beijing Times calculates that more than 100 million bottles of such water were sold last year. The profit derived from these illegal sales exceeded 1 billion RMB, or about $12 million.

As a Chinese, I am used to reading about dangerous fakes. But this case really enraged me. This is water that many of us drink every day, after all. And the whole reason people pay extra for bottled water is for the quality—and safety. The Beijing Times did a story a couple of days ago that revealed the illegal business has been going on for five years. One unlicensed water bottler told the newspaper: “I filter the tap water before filling the bottle because I am a moral person and I don’t want to get people sick.”

When I read that I myself felt sick --- with anger. I also asked myself where are the government and regulatory authorities who are supposed to be protecting us. The rampancy of fake water comes down to the inability of the government in China to enforce its own laws. In this case, red tape is usually blamed. The local officials with responsibility for preventing counterfeiting have no legal power to search an illegal bottler’s factory, it is said.

How much longer can Beijingers put up with these kind of mealy-mouthed bureaucratic excuses? Maybe, like everything else in this city, we should look to the Olympics for salvation. After all, if this issue isn’t tackled soon, athletes and visitors around the world might show up for Olympics next year carrying their own water and food.

Wednesday 4 July 2007

Pollution KILLS 460,000 a year in China: World Bank

Any country that grows at 10% a year for 20 years and has become the manufacturing base for the rest of the world has to expect an increase in pollution. With demand for cars, energy and consumers goods growing even faster as incomes rise the problem of pollution is not going to go away.

The World Bank today released a report (currently off line!) that gives some numbers to the amount of deaths that pollution in China has caused.

This report raises a number of questions.

1. Are these deaths the cost that has to be paid by China for the reduction in poverty and by the West for the cheap consumer goods that we enjoy?

2. Do we agree with the World Bank putting a value of 1 million yuan on the price of a life? This is considerably lower than any developed country VSL figure. An American life is thought to be worth around $6million. Are these numbers compatible? (US$1=7.604 Yuan).

3. Will the announcement of these figures lead to social unrest in China? We know that environmental protests are growing and are being reported. Likewise arrests of environmental protesters have increased.

4. Why is the report at the link below unavailable?

Pollution Kills 460,000 Chinese a Year - World Bank

BEIJING - About 460,000 Chinese die prematurely each year from breathing polluted air and drinking dirty water, according to a World Bank study.

The Financial Times reported on Tuesday that the Chinese government, the bank's partner in the research project, had asked the lender not to publish the estimates for fear they could trigger social unrest.

The conference version of the study, available at the bank's Web site, says some estimates of the physical and economic cost of pollution have been omitted because of uncertainties about calculation methods and their application.

However, the report goes on to estimate the health costs from premature deaths associated with outdoor air pollution at 394 billion yuan (US$51.8 billion). With each life valued at 1 million yuan, that works out at a death toll of 394,000.

The study puts the cost of deaths from diarrhoea and cancer caused by drinking polluted water at 66 billion yuan, pointing to 66,000 premature deaths a year.

China-watchers said it was standard practice in research projects conducted with the government for both sides to have a veto over the conclusions.

The World Bank said the final report would be out soon.

"Consistent with the World Bank's approach to this type of joint research project, the findings of the report are being discussed with the government. The conference version of the report did not include some of the issues that are still under discussion," the bank's Beijing office said in a statement.

An economist in Beijing said the study's estimate of premature deaths from airborne pollution, although shocking, was broadly in line with earlier published World Bank research and with recent findings by Chinese academics.

The World Bank is also concerned by indoor air pollution, principally breathing in fumes from coal-burning stoves and cooking oil. Its experts estimate that as many as 300,000 Chinese a year die prematurely in this way.

China, home to some of the world's 20 most polluted cities, is redoubling its efforts to clean up the environment.

The authorities are closing down dirty industrial plants, raising car fuel-efficiency standards and tweaking taxes to discourage energy-intensive production. China on Sunday also introduced higher drinking water standards.

The conference edition "Cost of Pollution in China" is at:

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIF ICEXT/EXTEAPREGTOPENVIRONMENT/0,,contentMDK:21252897~pagePK:340 0 4173~piPK:34003707~theSitePK:502886,00.html

Tuesday 3 July 2007

Organised labour and the dangers of going on strike

For a country that describes itself as "socialism with Chinese characteristics" this story also from ChinaDaily highlights the "wild west" nature of the Chinese economy during this unprecedented period of growth.

Going on strike appears to be a very dangerous occupation. Even in a communist country the workers appear to be getting a rather raw deal in the face of the ruthless forces of capitalism.

The bits in bold are telling.

Migrant workers attacked by mob
One migrant worker is fighting for survival, two are missing, and six remain in serious situation in the hospital, after armed gangsters in Guangdong Province beat up about 300 migrant workers who had gone on strike to demand unpaid salaries on Friday, the Chongqing Morning Post reported .

The Beijing-based China News Service reported on Monday that four suspects were detained by police.

The migrants, most of whom are from Southwest China's Chongqing Municipality and Sichuan Province, were working at a construction site for a hydropower station on the Dongjiang River in Dongyuan county, in South China's Guangdong Province.

The workers, who have not been paid for four months, went on strike on Friday, which led to the descent by more than 200 thugs, according to the newspaper.

"The first batch of about 50 gangsters came with spades in their hands, and the second batch had axes, steel pipes and sabres, and there were more behind them," the newspaper quoted Liu Gangqing, one of the migrant workers, as saying.

"They didn't stop lashing out at us even when the police arrived," said another migrant worker Li Chuanbing.

Chinese Universities suffer from unpaid loans to students

So Chinese students are not paying their tuition fees to their domestic Universities. In the UK non-payers do not receive their marks and therefore their degree until payment is forthcoming.

This article makes the difference in costs between a UK/US degree and a Chinese degree clear. In the UK a typical masters course cost around £10,000 or $20,000. In contrast the average Chinese tuition fee is £250 or $500. Is the value/quality of a UK degree worth 40 times as much? Do students with a UK degree earn 40 times that of a domestic student? (Admittedly this is a gross simplification of a complex issue).

However, the bottom article also states that even at $500 the cost of education in China means it is close to the top in terms of the cost relative to per capita GDP. It is therefore all the more astonishing that 50,000 Chinese students a year come to the UK for a higher education.

If education is a public good then maybe the Chinese government should be willing to accept a degree of non-payment. In my opinion this ChinaDaliy article suggests that the government has little idea on how to solve this problem (depending on how you define a problem). See article below this one.

Universities owed millions of yuan in unpaid loans
BEIJING -- Many Chinese colleges and universities are owed millions of yuan because students are unable to, or choose not to, pay back tuition loans, the Ministry of Education said on Monday.

"We have found that many universities and colleges have several million yuan of defaulted tuition fees, some have nearly a billion," Cui Bangyan, a senior ministry official said at a press conference in Beijing.

Cui said that the average annual tuition charge for one college student on the Chinese mainland has remained between 4,000 and 4,500 yuan (513 and 577 U.S. dollars) since 2000, but some majors, particularly at prestigious universities, could cost far more.

"Even the average 4,000 to 4,500 yuan can be a heavy burden for a student coming from some rural, remote or minority regions," Cui said, noting that a college student may spend more than 10,000 yuan a year including tuition, accommodation and other costs.

Cui also said some students pretend they can not afford to pay back the loans or make up excuses as to why they can not clear their debts.

In 1999, China's education authority increased the size of the enrolment to its higher educational institutions, allowing around 5 million students to go to college each year.

Loans are available to poor students and the government pays the interest on the loan, which has to be paid back in full before graduation.

"Paying tuition on time is an obligation of every college student," Cui said, "if he or she can't afford it, the college, government and the ministry will help him to finish his or her studies."

"Government aid does not mean a free higher education," he affirmed.

"College students should be honest when applying for a grant or loan, Cui said.

To show that the Chinese government does care about redistribution comes the news that:

China promises 50B yuan for impoverished students

The Ministry of Education will spend 50 billion yuan ($6.5 billion) this year to help students from poor families.

The money will come from the budgets of central and local governments. It will go toward the setting of national scholarships, stipends and student loans to ensure these students can continue their education, ministry spokesman Wang Xuming said yesterday.

The funds will cover more than 20 percent of college students and 90 percent of vocational students.

China's institutes of higher learning are one of most expensive in the world relative to per capita GDP, said Liu Shouren, a member of the Chinese Academy of Engineering.

Annual tuition fees have increased to more than 5,000 yuan, about 10 times that of a decade ago, and incomes have not kept pace.

According to a report last year by the China Youth Development Center, education was the No 1 expense of a family.

About 33 percent of a rural family's yearly income went on education, while the figure is about 23 percent for urban families.

Monday 2 July 2007


In this week's Times Higher the front page highlights a new initiative by the British Council to set up a website for overseas students to rate their course.

The Universities are worried, the unions are worried - this generally means that the students will benefit.

There are dangers - naming and shaming courses can harmful but if the courses gave good value for money and an excellent education which is surely the aim of a course then the good Universities and courses will have nothing to worry about.

In fact, this was one of the motivations of this blog - to cut through the advertising and hype and to provide real information. Granted there is an emphasis on University and course rankings but this is because, in the real world, when applying for jobs the reputation of a University and indeed it's location matters.

The most interesting part of the article in my opinion is that is suggests that Chinese students in particular tend to place a great deal of emphasis on "word of mouth" against advertising or rankings. In a sense this is good news and incentivises course leaders to provide a good service and not to simply treat overseas students as "cash cows" (alluded to in the article).

Finally, comes the suggestion that Chinese students may receive better tuition and supervision at those Universities below the elite level. I believe there may be some truth in this - ultimately the "feedback" website would allow us to judge. Those Universities who provide the best education should be rewarded with increases in student numbers whereas those Universities that trade on reputation alone deserve to see numbers fall.

It will be interesting to see if this initiative gets off the ground.

My bold emphasis.

Foreign students need a site that lets them evaluate their experience, British Council is told. Olga Wojtas reports

Academics could see their departments named and shamed by their students on a new international ratings website under a proposal to the British Council.

A recommendation to set up the site, which would allow all international students to describe their experience at UK universities just like consumers rate hotels or holidays, is made in a report to the British Council this week by Greg Philo, research director of the Glasgow University Media Unit.

The idea has alarmed the lecturers' union. Sally Hunt, general secretary of the University and College Union, said: "People are far more likely to tell friends and colleagues about bad experiences than good ones. We would have concerns about the motives of some people posting on a site like this.

Online gossip might seem harmless enough. However, it can lead to online bullying and malicious rumours spreading across campus."

Professor Philo's report focuses on the 50,000 Chinese students studying in the UK. It found that when they choose a course they value word of mouth over sources of information such as advertising and league tables.

"You can't beat people's direct speech in terms of getting people to trust what they say," he said.

The research is based on the views of 40 interviewees in China and 120 Chinese students in the UK and suggests that a website would help shake up the traditional university hierarchies.

Some students complained about their supervisors and felt they could be better looked after in mid-ranking universities compared with elite universities, where top researchers were too busy for them. Some 69 per cent thought they had been recruited as "cash cows" but generally accepted this. A similar proportion said their course was good value for money.

Almost two thirds said their experience in the UK was "good" or "very good", while only 29 per cent rated their education in China as "good" or "very good".

"They found higher education very creative and very original. It was a very cherished experience," said Professor Philo.

Beatrice Merrick, director of services and research at UKCOSA, the council for international education, said: "Two students on the same course may have completely different experiences. If the disgruntled one posts comments, there's no balancing view. Students should look at all possible sources, and word of mouth is valuable, but there's a risk of disproportionately negative comments appearing."

The following posts may be of interest:

Ten Reasons Why You Should Study in the UK
Econphd Ranking of "Economics departments"

Studying "Economics in the UK": General Links

Which UK University to study in? "Academic Ranking of World Universities"

Studying in the UK: Cost of Accommodation

World University Rankings: Rankings and text

"UK University Ranking": large city effect