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.

RateUKcourses.com?

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.

RateUKcourses.com?

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

Life in China: recycling for a living

This post from Ben at Ben's Blog "A Midwesterner in the Middle Kingdom" provides an interesting insight into the hidden or not so hidden economy of China's growing cities.

It makes an interesting contrast to jump from "stock market frenzy" to how many Chinese make a living and survive on less than a dollar a day recycling other people's rubbish. As a side issue China's economy can only benefit from such activity - the problem will come when the Chinese become too wealthy to indulge in such activity and follow the West down the road to becoming a disposable society.

Ben has an excellent writing style and the blog is always interesting. I must add it to my blog roll if it is not already there.

Professional Recycling

One summer when I was 10 years old, I heard a rumor at summer camp that there was a grocery store in my neighborhood which would pay cash for recycled aluminum cans. For the next 4 weeks, I collected all of the aluminum cans from fellow campers until I had nearly filled an entire garbage bag. At the end of the summer my dad took me to the grocery store. I proudly showed the clerk my bag full of cans which was nearly half my size. He told me I was a responsible little boy for caring so much about the environment, and then handed me $1.29 cash for my summer worth of can collecting.

5 years later, I started my first real job, working as a sacker in a local grocery store. I was paid $4.25 per hour, which was the minimum wage in Kansas at the time. It didn’t take me long to figure out that labor is worth more than materials in the USA.

While I was working at the barber shop, three or four times per day, a middle aged man or woman would rummage through the trash can in front of the store. There was a man who would collect bottles and cans, a woman who would collect the plastic disposable cups we used to serve the customers water, and there was even a lady who would come every few days to collect all of the hair. By the end of the day, there was hardly anything left in the trash.

To a casual observer, these people might seem to be beggers. Fuzhou does have its share of panhandlers, but these are not the same people who are digging through the trash Rather, the people who collect our disgarded items are professional recyclers.

In Fuzhou, recyclers can collect .07 RMB for an aluminum can and .1 RMB for plastic bottles. At this rate, it would take about 109 aluminum cans to equal 1 US dollar. This rate is not too far off the one I was given that summer I collected cans at camp. The return is still not high, but when you consider a low-level service industry job requires 4 hours of work to earn 1 US dollar, the prospects of making a living off of recycling suddenly become more attractive. Add that China’s densely populated cities make the process of bottle collecting more efficient than they would be in the US, and it is not surprising why professional recycling is such a common profession in China.

In addition to recycling cans and bottles, professional recyclers also collect and/or buy used electronic devices, books, magazines, cardboard, CDs, and virtually anything else which at some time had value. Some of it is resold, and some is broken down for scrap. The recyclers ride their bikes through city streets with big signs placed in front of the handle bars which read 高价回收 (high price recyclying) and contain a list of items (usually household electrical appliances) which they will buy.

The future will only tell how much longer recycling will remain a profession in mainland China, and presumably as the price of labor rises, the draw to professional recycling will recede. But as barbershop workers are still making only 24 cents an hour, recycling stands to remain a viable profession for the near foreseeable future at least.

Will a savings tax slow the stock market frenzy?

With the bubble continuing to inflate it is clear that certain elements of the underlying structure of the Chinese economy are to blame. The bottom line appears to be a shortage of alternative assets for the local Chinese to invest in (for example, overseas shares, real estate).

The latest idea is to abolish the savings tax to encourage individuals to keep their savings in accounts instead of throwing it at the seemingly one way street that it is the Chinese stockmarket.

With increasing inflation means that real returns are close to zero the Chinese government has a long way to go to turn around the stockmarket juganaught.

The Independent summarise the current proposition:

China to act on savings tax to deter share-buying frenzy

Chinese regulators are considering suspending or abolishing a 20 per cent tax on bank savings to try to persuade consumers to stop moving cash out of bank deposits into the increasingly heady world of stock market investment.

Rising inflation is badly eroding the value of savings in China, where people tend to save as much as 40 per cent of their income in the absence of a solid social welfare system.

This has helped to fuel a boom in share buying, which has replaced bank saving as the most popular investment option in China and stoked fears of an unsustainable bubble. The country's stock market rose 130 per cent in 2006 and by over 50 per cent already this year, despite some vertigo-inducing corrections that have caused ripples around the world.

China has seen the introduction of record numbers of new share-trading accounts which now add up to over 100 million. A central bank survey last month showed that consumers now prefer shares to deposit accounts.

The regulators hope that changing the tax, first introduced in 1999, would make saving in banks more attractive. JP Morgan economists said removing the tax would be the equivalent of a 60 basis point rate rise for savers.

The move into share ownership has been driven by ordinary investors, such as former State-owned Enterprise (SOE) employees, students and fledgling business people in the booming "New China".

These investors are unable to invest in property but are unhappy with the returns they are getting on their bank deposits, because rising inflation has brought real deposit rates close to zero. Rising food prices in China have seen CPI creep up to 3.4 per cent in May.

The benchmark one-year deposit rate is now 3.06 per cent, just slightly higher than the 2.9 per cent rise in the consumer price index to May this year.

"What's really happened is a shift out of long-term savings deposits in favour of more liquid short-term deposits," said Jonathan Anderson, chief Asia economist at UBS in Hong Kong.

"The domestic stock market has been booming, with a sharp rally in March and April; [and] households and firms liquidated longer-term deposits to buy equities," said Mr Anderson.

Finance Minister Jin Renqing said the government had decided to look into the issue in the light of a booming economy.

How to Win the China Piracy Battle

From the inbox:

This is an interesting article from Shaun Rein at Business Week:

How to Win the China Piracy Battle

As Shaun correctly identifies, economics plays a crucial role in the demand for and the supply of pirated goods. Where I would take issue is that even if counterfeiting was removed entirely as of tomorrow it would make only a small dent in the US trade deficit and not as has been written "a long way to reducing the deficit".

The bottom line is that China is still developing and at this stage of development with per capita incomes still so low piracy is inevitable. As China gets richer demand for authentic goods will increase and the problem will solve itself. Meanwhile Western multinational need to take a pragmatic approach and consider their pricing policies. Creating brand loyalty now will pay off in future years. Indeed, the owners of fake Rolex watching will be constantly dreaming of the day they can afford a real one.

A Matter of Economics

First, multinationals should try to stop the piracy by taking a business approach rather than a legal or moral one. They must become less moralistic about intellectual property theft by the Chinese. While they do have the legal high ground, their current posturing does little to stop the pirates or generate revenue from legitimate sales.

The problem is more a matter of economics than of a morally corrupt Chinese populace. As the disposable incomes of Chinese consumers continue to grow, brand loyalty gains currency, and domestic Chinese companies begin to lose revenue to pirates, intellectual property problems will be solved in much the same way as they were in Taiwan and Korea. Smart multinationals will make sure they are in a strong position to reap the benefits in China.

One positive sign is that Chinese are in many ways no different from other consumers. Millions are entering the ranks of the middle class, and they want to look the part of the urban aristocrat. If they cannot afford genuine items they turn to touts on the street hawking fake Louis Vuitton, Tiffany (TIF), Montblanc (CFR.VX), Rolex, and Polo (RL) items. But as Chinese consumers become increasingly sophisticated, the situation is changing. Now consumers can value the difference between a real Giorgio Armani tie and a fake one.

China 2007 vs. NASDAQ 2000 - ZEAL analysis

Interesting post from 22nd June comparing the NASDAQ in the year 2000 and the current Chinese stockmarket.

China 2007 vs. NASDAQ 2000

Whilst there are significant differences in the structure the similarities in the figures makes this a compelling little story.

All stock manias must come to an end as exponential price growth is inherently unsustainable. Eventually the public has bought all the stock it can buy so there are no untapped pools of capital left to bid on stocks. At this point the whole house of cards starts to implode. The SSEC’s behavior in the last month mirrors the NASDAQ’s around its own March 2000 top remarkably well. Caveat emptor.

H/T China thread on ADVFN.