Rat in the Kitchen? Bring in the eagles and foxes

Never one to miss out on the chance of completing a circle there is news today on how China intends to solve the invasion of China by 2 million rats (mice really but it does not make for such a good strap line).

The original post on this blog was:

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

In a solution that reminds me of the "old lady who swallowed a fly" nursery story we find that China has unleashed the eagles and foxes.

Of course, the natural question to ask is what to unleash on the foxes once they get out of control and start eating other livestock (and children)? Wolves perhaps or will hunger and guns be sufficient?

China battles rat plague with foxes and eagles [Scotsman]

BEIJING (Reuters) - Authorities in far western China have gone into battle against a plague of rodents by using "hot-shot" eagles and foxes, state media reported on Thursday.

For much of this year, grazing land in parts of Xinjiang province have been overwhelmed by growing numbers of rats and other rodents gobbling up grass and forcing out sheep, Xinhua news agency reported.

Now officials there think they have found a green answer -- eagles attracted by nesting stands and foxes unleashed on the armies of rats.

"Using these natural predators to kill the rodents is not only inexpensive, it can sustainably control rodent plagues and there's not environmental pollution," the report said.

Up to now, rat control around the grasslands has depended on scattering poison, and around hard-hit areas this year authorities used airplanes to do the job.

"The results have not been ideal," the report said,

Now across northern Xinjiang over a thousand eagle nests and stands have been erected, and authorities released 200 foxes bred in captivity to chomp through the rats, Xinhua said.

In one county, the number of rodent holes has dropped by 70 percent since the foxes were unleashed, it said.

Around half of restive Xinjiang's population are Uighur, an overwhelmingly Muslim Turkic ethnic group, or belong to other non-Han groups that traditionally lived off herding and trading.

Bumpy road ahead for growth but how big are the bumps?

Today's Independent has an article by Hamish McRae (writing from China) on the prospects for continued economic growth. Although the environment is barely touched on in this article (see previous post) it appears that even without this there are bumps in the road ahead but that they may be smoother than many believe (he should read the Economy article below).

A well balanced and optimistic story that gives us some hope that China will continue to develop without a major catastrophe.

Hamish McRae: When you look at China all you see is growth, but a bumpy road lies ahead

The article concludes:

But, having spent a week now travelling round China, it is hard not to believe that the economy has so much momentum that it will be able to push through the next downturn in reasonable shape. Some way in the future, China will become a normal economy. But, as the leaders of these growth companies gather in Dalian, all they see is growth. You can understand investors, particularly inexperienced ones, thinking pretty much the same way.

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The Great Leap Backwards

Excellent article and post covering the relationship between Chinese economic growth and continued environmental collapse. Article is by Elizabeth C. Economy.

Essential reading for anyone with an interest in China's environment and how it will impact on future economic growth.

Elizabeth C. Economy on "The great leap backward?" [Globalisation and the Environment]

We have talked at length in this blog about the environmental impact of China both within China and globally and specially the impact of environmental degradation on future growth and political stability. This long post covers this ground and more.

Chinese Military: Hacking and Transparancy

Two stories on the state of the Chinese military. The "Pentagon hacking" story is a good gauge of how quickly China is converging on the technological frontier. What begins with the military will spread, via knowledge spillovers, to industry.

The speed of Chinese technological development should not be underestimated.

China to Report Military Spending to UN

China said Sunday it will provide the United Nations with information on its military spending and arms deals for the first time in more than a decade, taking a step to address international concerns about the secrecy surrounding its defense spending and operations.

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China says spending for its People's Liberation Army, the world's largest standing army with 2.3 million members, grew 17.8 percent this year to about nearly $45 billion. It was the largest annual increase in more than a decade.

The Pentagon estimates China's actual defense spending may be much higher, because the official budget does not include money for high-priced weapons systems and some other items.

Although China does not currently provide information about its arms deals, several overseas organizations monitor the transactions.

The Stockholm International Peace Research Institute, which tracks the volume of arms transfers but not their financial value, said the three largest importers of Chinese arms in 2006 were Bangladesh, Pakistan and Iran, which accounted for nearly 75 percent of China's arms exports.

China is also a major arms exporter to Sudan, and has faced criticism from human rights activists who say Chinese weapons have been used in attacks in Darfur.

Chinese military hacked into Pentagon[FT]

The Chinese military hacked into a Pentagon computer network in June in the most successful cyber attack on the US defence department, say American ­officials.

The Pentagon acknowledged shutting down part of a computer system serving the office of Robert Gates, defence secretary, but declined to say who it believed was behind the attack.

Current and former officials have told the Financial Times an internal investigation has revealed that the incursion came from the People’s Liberation Army.

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“The PLA has demonstrated the ability to conduct attacks that disable our system...and the ability in a conflict situation to re-enter and disrupt on a very large scale,” said a former official, who said the PLA had penetrated the networks of US defence companies and think-tanks.

Research Paper: Interprovincial Migration in China: The Effects of Investment and Migrant Networks

Migation within China is an increasingly important topic when one examines the economics of China. Throughout histroy there have been significant waves of internal migration caused by famine, war and economics.

The limits of Chinese internal migration and not as well known as they should be. This new paper sheds some light on this issue.

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"Interprovincial Migration in China: The Effects of Investment and Migrant Networks"
IZA Discussion Paper No. 2924


Author: SHU MING BAO
University of Michigan at Ann Arbor - China Data
Center
Email: SBAO@UMICH.EDU
Auth-Page: http://ssrn.com/author=289828

Contact: ORN B. BODVARSSON
St. Cloud State University, Institute for the Study
of Labor (IZA)
Email: obbodvarsson@stcloudstate.edu
Auth-Page: http://ssrn.com/author=482448

Co-Author: JACK HOU
California State University, Long Beach
Email: jackhou@csulb.edu
Auth-Page: http://ssrn.com/author=348003

Co-Author: YAOHUI ZHAO
Peking University
Email: yhzhao@ccer.pku.edu.cn
Auth-Page: http://ssrn.com/author=336791

Full Text: http://ssrn.com/abstract=1001411

ABSTRACT: Since the 1980s, China's government has eased restrictions on internal migration. This easing, along with rapid growth of the Chinese economy and substantial increases in foreign and domestic investments, has greatly stimulated internal migration. Earlier studies have established that migration patterns were responsive to spatial differences in labor markets in China, especially during the 1990s. However, other important economic and socio-political determinants of interprovincial migration flows have not been considered. These include the size of the migrant community in the destination, foreign direct and domestic fixed asset investments, industry and ethnic mixes and geographic biases in migration patterns. We estimate a modified gravity model of interprovincial migration in China that includes as explanatory variables: migrant networks in the destination province, provincial economic conditions, provincial human capital endowments, domestic and foreign investments made in the province, industry and ethnic mixes in the province, provincial amenities and regional controls, using province-level data obtained from the National Census and China Statistical Press for the 1980s and 1990s. We find strong evidence that migration rates rise with the size of the destination province's migrant community. Foreign and domestic investments influence migration patterns, but sometimes in unexpected ways. We find that as economic reforms in China deepened in the 1990s, the structure of internal migration did not change as much as earlier studies have suggested. Consequently, our results raise new questions about the World's largest-scale test case of internal migration and strongly suggest a need for further research.
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China's Global Influence

This article is a nice little summary of China's spreading influence around the world and gives a good impression of the sheer size of China's demand for raw materials and its increasing use of investment, especially in Africa, to ensure continued supplies of raw materials to satisfy the increases in demand for consumer goods.

None of these trends will be reversing soon. An increasingly ferocious global grab for resources could be on the cards with the EU, US, Russia and China all piling in.

This article has a very dramatic journalistic style but it has some interesting statistics. My bold.

China's Influence Spreads Around World [WIBW News]

KARRATHA, Australia - For nearly three decades, Chinese peasants have left their villages for crowded dormitories and sweaty assembly lines, churning out goods for world markets. Now, China is turning the tables.

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The reason: China.

For years, China's booming economy touched daily life in the West most visibly through the "made-in-China" label on everything from clothes to computers. But now, economic growth is giving rise to something more that can't be measured just by widgets and gadgets — a shift in China's balance of power with the rest of the world.

China's reach now extends from the Australian desert through the Sahara to the Amazonian jungle — and it's those regions supplying goods for China, not just the other way around. China has stepped up its political and diplomatic presence, most notably in Africa, where it is funneling billions of dollars in aid. And it is increasingly shaping the lifestyle of people around the world, as the United States did before it, right down to the Mandarin-language courses being taught in schools from Argentina to Virginia.

China, like the United States, is also learning that global power cuts both ways. The backlash over tainted toothpaste and toxic pet food has been severe, as has the criticism over China's support for regimes such Sudan's.

To understand why China's influence is increasingly pushing past its borders, just do the math.

When 1.3 billion people want something, the world feels it. And when those people in ever increasing numbers are joining a swelling middle class eager for a richer lifestyle, the world feels it even more.

If China's growth continues, its consumer market will be the world's second largest by 2015. The Chinese already eat 32 percent of the world's rice, build with 47 percent of its cement and smoke one out of every three cigarettes.

China's desire for expensive hardwood to turn into top-quality floorboards for its luxury skyscrapers has penetrated deep into the Amazon jungle. For example, in the isolated community of Novo Progresso, or New Progress in Portuguese, one of the biggest sawmills was started by the mayor with financing from Chinese investors.

China accounts for 30 percent of the wood exported from logging operations in remote towns across Brazil's rain forest, where trucks carry the finished product hundreds of miles along muddy roads to river ports, said Luiz Carlos Tremonte, who heads an influential wood industry association. Many Chinese purchasers now travel to Brazil to clinch deals, and are almost always accompanied at business meetings by friends or relatives of Chinese descent who live there.

"Ten years ago no one knew about China in Brazil; then the demand just exploded and they're buying a lot," Tremonte said. "This wood is great for floors, and they love it there."

The Bovespa stock index in Brazil has climbed more than 300 percent since 2002, riding the China wave.

China is buying coal mining equipment from Poland and drilling for oil and gas in Ethiopia and Nigeria. It has poured hundreds of millions of dollars into Zambia's copper industry. It is the world's biggest market for mobile phones, headed for 520 million handsets this year. The list goes on.

Along with looking to other countries for goods for its people, China is also going far and wide in search of markets for its products.

In war-torn Liberia, where electricity is hard to come by, Chinese-made Tiger generators keep the local economy humming. Costlier Western brands, favored by aid agencies and diplomats, are beyond the reach of small business owners such as Mohammed Kiawu, 30, who runs a phone stall in the capital, Monrovia.

A used Tiger generator costs around $50, he said over the steady beat of his generator. "But even $250 is not enough to buy a used American or European generator. They are not meant for people like myself."

The Chinese generators are more prone to break down, Kiawu said. When the starter cable snapped on one, he replaced it with twine. But by making items for ordinary people, he predicted, China "will take control of the heart of the common people of Africa soon."

China is having to make up for decades of economic stagnation after the communist takeover in 1949.

When Chinese leader Deng Xiaoping began dabbling in economic reforms in 1978, farmers were scraping by. By 2005, income had increased sixfold after adjusting for inflation to $400 a year for those in the countryside and $1,275 for urban Chinese, according to China's National Bureau of Statistics.

"The Chinese don't want war — the Chinese just want to trade their way to power," said David Zweig, a professor at the Hong Kong University of Science and Technology. "In the past, if a state wanted to expand, it had to take territory. You don't need to grab colonies any more. You just need to have competitive goods to trade."

If China stays on the same economic track, it would become the world's largest economy in 2027, surpassing the United States, according to projections by Goldman, Sachs & Co., a Wall Street investment bank. And unlike Japan, which rose in the 1980s only to fade again, China still has a huge pool of workers to tap and an emerging middle class that is just starting to reach critical mass. Many development economists believe China still has 20 years of fairly high growth ahead.

But the transition to a larger presence on the global stage comes with growing pains, for China and the rest of the world.

As Beijing plays an ever bigger role in the developing world, some Western countries fear it could undermine efforts to promote democracy. In its attempt to secure markets and win allies, China is stepping up development aid to Africa and Asia. Chinese President Hu Jintao pledged last year to double Chinese aid to Africa between 2006 and 2009, promising $3 billion in loans, $2 billion in export credits and a $5 billion fund to encourage Chinese investment in Africa. China has also promised Cambodia a $600 million aid package and agreed to loan $500 million to the Philippines for a rail project.

But China also extends aid to states such as Myanmar, Zimbabwe and Sudan whose human rights records have lost them the support of the West. Actress Mia Farrow has labeled next year's Beijing Olympics — a point of pride for China — the "genocide Olympics" because of China's support for Sudan, at a time when the West seeks to punish it for its military actions in Darfur. China buys two-thirds of Sudan's oil output.

"In some ways, it will be integrating us into a new international order in which democracy as we've known it or the right to open organized political activity is no longer considered the norm," said James Mann, author of "The China Fantasy," a book about China and the West.

China is also facing some of the unease that powers before it have encountered. In Africa and Asia, some complain that massive China-funded infrastructure projects involve mostly Chinese workers and companies, rather than create jobs and wealth for the local population. And Moeletsi Mbeki, a political commentator and brother of South African President Thabo Mbeki, likens the trade of African resources for Chinese manufactured goods to former colonial arrangements.

"This equation is not sustainable," Mbeki said at a recent meeting of the African Development Bank in Shanghai. "Africa needs to preserve its natural resources to use in the future for its own industrialization."

The backlash is also coming on the consumer front, with Chinese goods earning a dubious reputation for quality. In the United States, there is a furor over the standard of Chinese imports. In Bolivia, vendors peel off or paint over any indication that their wares were "Hecho en China," Spanish for "Made in China."

A woman selling bicycles in El Alto, a poor city outside the capital, La Paz, insisted they were made in Japan, South Korea, Taiwan or even India. With some prodding, she acknowledged the truth. "They're all Chinese," she said, declining to give her name lest it hurt her business. "But if I say they're Chinese, they don't sell."

Even those who benefit from China's growth express some wariness. Aerospace giant Boeing expects China to be the largest market for commercial air travel outside the United States in the next 20 years, buying more than $100 billion worth of commercial aircraft, U.S. trade envoy Karan Bhatia said in a recent speech.

"Right now, we're hiring every week," noted Connie Kelliher, a union leader. "Things couldn't be better."

Yet Boeing workers remain wary of China's ambitions to build its own planes. next year China plans to test-fly a locally made midsize jet seating 78 to 85 passengers. It also has announced plans to roll out a 150-seat plane by 2020.

"It's kind of a double-edged sword," Kelliher said. "You want the business and we want to get the airplane sales to them, but there's the real concern of giving away so much technology that they start building their own."

That's what happened to Western and Japanese automakers, which made inroads in the Chinese market only to see their designs copied and technologies stolen. Already, China's vehicle manufacturers are venturing overseas, exporting 325,000 units last year — mostly low-priced trucks and buses to Asia, Africa and Latin America.

"We're taking a bigger piece of the pie," said Yamilet Guevara, a sales manager for Cinascar Automotriz, which has opened 20 showrooms in Venezuela in the past 18 months, offering cars from six Chinese makers. "They ask by name now. It's no longer just the Chinese car. It's the Tiggo, the QQ."

China's biggest car company, Chery Automobile Co., just announced a deal with the Chrysler Group to jointly produce and export cars to Western Europe and the United States within 2 1/2 years.

Given the speed of China's ascent, it's perhaps not surprising that China itself is trying to calm some of the fears. Its slogan for the Beijing Olympics: "Peacefully Rising China."

Tax competition in China

There is a growing economic literature that examines the roll of tax competition on the geographic location of firms and specifically, in an international trade context, multinational location choice,

There is no doubt that tax differentials can cause distortions. China is not new to this game with the setting up of special economic zones effectively kick starting China's entry into world markets.

This article shows how government policy can quite quickly effect the location of firms and hence jobs within China. All countries undertake regional economic policy and this is just one example of how China is attempting to get the central and Western regions to "catch up" with the Eastern and coastal regions.

The trade off is always the same. Do Chinese firms relocate to benefit from lower VAT even if the infrastructure and transport networks are worse? Cost-benefit analysis should sort that one out. The same decision is made when MNEs decide whether to stay in the US or the EU or move to China to take advantage of lower costs/ wages/ regulations.

Manufacturers moving inland from Hangzhou as central province VAT reform kicks in [China Briefing]

Textile manufacturers in and around Hangzhou, long one of the region’s pillar industries, are beginning to move their operations inland as China reduces the VAT burden in the central provinces.

Beginning July 1, 2007, the Ministry of Finance and the State Administration of Taxation reduced the VAT burden in 8 sectors within 26 specified industrial cities in the six central provinces of Anhui, Henan, Hubei, Hunan, Jiangxi, and Shanxi.

The new system, which applies to both domestic and foreign invested enterprises in the central provinces, benefits general taxpayers engaged in the equipment manufacturing, petrochemical, metallurgy, automobile manufacturing, agricultural product processing, mining, electrical power, and high/new technology sectors within the 26 specific industrial cities.

The input tax can be deducted upon activities listed below:

* purchase of fixed assets (including fixed assets obtained as donation and capital injection)
* goods purchased or services obtained for self-produced fixed assets
* fixed assets obtained by financial lease and the lessor paid VAT as per the relevant tax regulation (Guoshuihan [2000]514)
* transport costs paid for fixed assets

Younger, Peacebird and Progen, famous textile companies originally from Zhejiang, have already moved their manufacturing bases to the central provinces in a bid to cut costs. “The transfer of the textile industry from the east coast to the central and western regions is already going on, this VAT reform will expedite it,” says Mr. Han Licheng, vice chairman of the Zhejiang Provincial Clothing Association.

Some have complained however, that although production costs are reduced in the central provinces, the environment for manufacturing is still not as good as in Zhejiang province. While companies are looking to move their production facilities inland, many are keeping their operations base and supply chain in place in the eastern provinces.