Most of us are accustomed to making airline reservations and finding out that the great price we found does not include all of those taxes ! The stripped down price is used to grab your attention and then nail you with the "total cost."
Pricing in China is calculated in much the same manner. The base price is nearly always a stripped down price which si then "rebuilt" with various extras to form the final price. The final price is not always a bargain.
I have a bank account at a HK bank operating in China. They gave be two accounts within the master account. When I make a deposit into one account (with no minimum balance) and then try to transfer funds into the other account I am charged a transfer fee of 1% for the privilege. I was told that this covers their internal costs.
This makes no sense to me what so ever as the transfer was within the same bank and within the same master account. Complaining is of no use !
Purchasing a flat in Shanghai was much the same. Every single transaction has a stamp tax no matter how small including copying. When you add all the costs up it is a shocking revelation that what you thought was a reasonable transaction cost is a hit to your savings account !
viewed another way it is certainly easier for firms to track their costs if every single cost is broken out as a single transaction cost and charged to the customer. It also allows markups to be done at each stage and be easily tracked.
No wonder China is becoming the capital center of the world !
Saturday, May 9, 2009
Missing But Not Lost
Apologies to readers for my absence for teh past few weeks. The gap in this commentary is in no way an expression of a lack of commitment or a lack of topics to discuss but rather a reflection of constant work and little rest !
Here starts another sequence of topics !
Here starts another sequence of topics !
Saturday, March 28, 2009
Export Rebates Increase
China raises export rebate to spur growth
(Xinhua)
Updated: 2009-03-28 00:04
Updated: 2009-03-28 00:04
BEIJING - China raised the export rebate on 3,800 items to maintain growth, the Ministry of Finance and the State Administration of Taxation (SAT) said Friday.
It was the sixth increase since last August when the government decided to raise refunds in an attempt to tackle slumping exports amid the global financial crisis.
The tax rebate for textile and garment items would be 16 percent.
A special item, CRT televisions, would have a 17 percent of tax refund.
"It was an extraordinary measure taken under extraordinary conditions," said Zhao Yumin, a researcher with the Ministry of Commerce.
He said slumping exports presented the Chinese government with unprecedented challenges. The refund increase underscored the government's resolution to maintain economic growth and secure employment.
China's exports plummeted 25.7 percent year-on-year in February, the worst decline in more than a decade, as global demand deteriorated amid the deepening recession.
Although previous data showed some signs of economic recovery, the economic outlook remained uncertain as profits of China's major industrial enterprises contracted 37.3 percent year-on-year during the first two months of 2009, the National Bureau of Statistics (NBS) said Friday.
Bai Jingming, economist with the Ministry of Finance said more refunds meant enterprises could retain more cash in hand and they could use that money to restructure their business and improve production technology.
The SAT said last week that the actual export tax rebate in the first two months increased 20.8 percent year-on-year to 66.7 billion yuan (US$9.77 billion).
Experts said nearly all Chinese exports had a 17 percent export rebate during the Asian financial crisis. Compared to that, China still has room for further rebate increases.
State Owned vs Privately Owned
A privately owned enterprise in China is revered when the economy is going great guns because of their "contribution" to the growth in China. They receive praise and awards and are set on a pedestal as great entrepreneurs and social leaders.
When the economy falters - as it has recently - then private enterprise CEOs are faced with limited ability to borrom capital to maintain cash reserves. They struggle with holding on to their employees and have begun to seek investors to resolve their capital problems.
Private enterprises in China are still second class citizens as their access to capital is limited and their recent experience - over the past 10/15 years - has not provided an experience base to raise capital or seek investment partners.
Many are increasingly stuck in the middle with no good options.
Paradoxes remain.
When the economy falters - as it has recently - then private enterprise CEOs are faced with limited ability to borrom capital to maintain cash reserves. They struggle with holding on to their employees and have begun to seek investors to resolve their capital problems.
Private enterprises in China are still second class citizens as their access to capital is limited and their recent experience - over the past 10/15 years - has not provided an experience base to raise capital or seek investment partners.
Many are increasingly stuck in the middle with no good options.
Paradoxes remain.
Wednesday, March 25, 2009
Enterprises Seeking Investors/Buyers
A sampling of the projects I have come across in the last month:
1. High end specialty baby furniture and clothing web site and specialty store.
2. High end electric transformers for Railways.
3. PVC wrapped industrial cables
4. Wood Flooring factory
All are seeking capital to expand to meet increased demand !
1. High end specialty baby furniture and clothing web site and specialty store.
2. High end electric transformers for Railways.
3. PVC wrapped industrial cables
4. Wood Flooring factory
All are seeking capital to expand to meet increased demand !
Teachers and Students
Everyone knows that teachers are revered in Chinese society. This tradition is thousands of years old and continues today.
In search of investors and consulting clients I have been teaching at Shanghai JiaoTong University's mid-career executive training programs for the past six months. The classes are organized around different themes ranging from Real Estate to Finance to Private Equity to Innovation. I have been teaching a 2 day section once a month for a number of different programs.
Once I become the teacher of these executives in the 30s and 40s the teacher-student relationship is "fixed" for life. It is a very strong bond complete with respect and deference. Within this relationship nearly anything becomes possible.
Some of my students have become investors. Some have become clients and of course most have become friends.
The majority of these students are mid-career private enterprise entrepreneurs. They are seeking information on developing their companies - particularly for financing.
It's a great prospecting tool 1
In search of investors and consulting clients I have been teaching at Shanghai JiaoTong University's mid-career executive training programs for the past six months. The classes are organized around different themes ranging from Real Estate to Finance to Private Equity to Innovation. I have been teaching a 2 day section once a month for a number of different programs.
Once I become the teacher of these executives in the 30s and 40s the teacher-student relationship is "fixed" for life. It is a very strong bond complete with respect and deference. Within this relationship nearly anything becomes possible.
Some of my students have become investors. Some have become clients and of course most have become friends.
The majority of these students are mid-career private enterprise entrepreneurs. They are seeking information on developing their companies - particularly for financing.
It's a great prospecting tool 1
Thursday, March 19, 2009
Think About This....
The US government needs Japan and China to continue to buy US Treasuries.
The US Treasury has decided to purchase a record number of Treasuries themselves in order to try and stimulate the US economy.
The US Congress is approving a higher budget and likely will approve even higher budgets.
The borrowing and government spending will weaken the value of the US dollar.
The weakening US dollar could impact the value of Japan's and China's investment in the US economy.
This could then drive a reduction in future purchase of US Treasuries.
Such a pull back will likely translate into a future loss of confidence which could further weaken the economy globally.
So what is the right path for China's central bank to take ? Continue to purchase US Treasuries ? Reduce these purchases ? Find a third way ?
Regardless this interlinking and cyclical argument demonstrates the intensity of the interrelated nature of the global economy.
Governments must find ways to work together and find global solutions which are not cause for conflict but are cause for cooperation.
The US Treasury has decided to purchase a record number of Treasuries themselves in order to try and stimulate the US economy.
The US Congress is approving a higher budget and likely will approve even higher budgets.
The borrowing and government spending will weaken the value of the US dollar.
The weakening US dollar could impact the value of Japan's and China's investment in the US economy.
This could then drive a reduction in future purchase of US Treasuries.
Such a pull back will likely translate into a future loss of confidence which could further weaken the economy globally.
So what is the right path for China's central bank to take ? Continue to purchase US Treasuries ? Reduce these purchases ? Find a third way ?
Regardless this interlinking and cyclical argument demonstrates the intensity of the interrelated nature of the global economy.
Governments must find ways to work together and find global solutions which are not cause for conflict but are cause for cooperation.
Cyclical Technology Transfer
There is a brewing challenge in China's continued development from a rural economy to an industrial economy to an Information-based economy and finally to an Ecologically-friendly economy.
China has been on the receiving end of technology transfer for many years since 1980. It has used this new technology to build a rapidly developing economy. This technology has driven China's export engine.
Unfortunately the export engine has stalled and may stall completely. The companies who have built businesses and wealth on the back of this momentum now must face the reality that they must shift their focus from quick "easy" rapid growth to the next new thing - environmental technology.
The US on the other hand has begun to put environmental technology as their next new focus. The US is now embrassing this as the new standard to measure businesses and technology.
If China does not make the shift to the next new thing rapidly enough it will end up in the same position it has been in for the last 20 years - importing technology.
So China's challenge is not to "wait" but rather to invest in R&D to develop its own next new thing technology and solutions so it is not faced with the same challenge of importing technology.
This is not a small challenge but one that Chinese private enterprises must face squarely head on.
China has been on the receiving end of technology transfer for many years since 1980. It has used this new technology to build a rapidly developing economy. This technology has driven China's export engine.
Unfortunately the export engine has stalled and may stall completely. The companies who have built businesses and wealth on the back of this momentum now must face the reality that they must shift their focus from quick "easy" rapid growth to the next new thing - environmental technology.
The US on the other hand has begun to put environmental technology as their next new focus. The US is now embrassing this as the new standard to measure businesses and technology.
If China does not make the shift to the next new thing rapidly enough it will end up in the same position it has been in for the last 20 years - importing technology.
So China's challenge is not to "wait" but rather to invest in R&D to develop its own next new thing technology and solutions so it is not faced with the same challenge of importing technology.
This is not a small challenge but one that Chinese private enterprises must face squarely head on.
Dunkin Donuts in Shanghai GuBei
Dunkin Donuts has arrived in my neighborhood in Shanghai. The coffee is authentic and the donuts are pretty close.
For those who know me well you can imagine that this is an exciting day !
For those who know me well you can imagine that this is an exciting day !
Friday, March 13, 2009
Imports/Exports
The latest figures on China's imports and exports now show very clearly the impact of the global recession on China's growth. The export sector will continue to see dramatic reductions. predictions are for a 15% drop in 2009 over 2008.
Imports are also dropping. Most of China's imports are raw materials necessary for industrial expansion. With growth slowing imports are also slowing.
The solution remains stimulating domestic growth in China's consumer and industrial sectors. This will take time to gain momentum. 2009 and 2010 are likely to be the transition years. The economy is undergoing a major shift from seeking external growth engines to relying on internal growth engines.
This shift was always going to be necessary but now it has become an imperative. China's ability to grow is now in its own hands rather than in the hands of western consumers buying inexpensive goods at Walmart !
Imports are also dropping. Most of China's imports are raw materials necessary for industrial expansion. With growth slowing imports are also slowing.
The solution remains stimulating domestic growth in China's consumer and industrial sectors. This will take time to gain momentum. 2009 and 2010 are likely to be the transition years. The economy is undergoing a major shift from seeking external growth engines to relying on internal growth engines.
This shift was always going to be necessary but now it has become an imperative. China's ability to grow is now in its own hands rather than in the hands of western consumers buying inexpensive goods at Walmart !
The Train
As many of you know I prefer to ride the rails in China over flying. Perhaps it is because of the years I spent in south China in the 1980s as a teacher in the Railway Ministry.
I have just arrived in Beijing after an overnight train ride from Shanghai. Departure at 7:30 pm and arrive at 7:00 am. The beds are comfortable and the service is great.
If China continues to build new rail lines as planned this country will be the most interconnected country in the world !
I highly recommend it !
I have just arrived in Beijing after an overnight train ride from Shanghai. Departure at 7:30 pm and arrive at 7:00 am. The beds are comfortable and the service is great.
If China continues to build new rail lines as planned this country will be the most interconnected country in the world !
I highly recommend it !
Tuesday, March 10, 2009
The growing US-China Conflict
This blog has focused quite a bit on the issues involving the US and China. The short term and long term relationship between the US and China is likely to determine the nature international relations for the next few years.
The US has become even more reliant on the Chinese government to purchase treasury bills and yet it continues to "demand" currency reform at the same time. There is a significant conflict between these two perspectives.
I feel that the root of the issue lies in American's limited understanding of China and a fear that China will become a future rival for the US. of course there is some truth in this possibility but at the same time there is also an opportunity to build a partnership between the US and China that could ield considerable mutual benefits for all parties.
The US should consider changing its view of China as a backward country rife with all manner of social and economic problems. Why not take an approach of creating a partnership with China to assist in resolving problems. Why not put aside the prejudices of history and consider forging a new path based on solving problems and creating a better future ?
I am not naive enough to think that things are easy to solve or that being a "nice guy" will resolve difficult issues, however the Chinese view of the US remains extremely positive...why not take up this mantle ?
There is no other country in the world that Chinese have more respect for than the US. This is a powerful opportunity that the US could grab and use as a base for building a partnership based on the future rather than the past.
The cartoon below from The Economist describes the current impasse but also suggests that the answer is just to open the flood gates...The US has to be responsible for the financial problems which originated in the US but the Chinese side needs to use its new financial "power" (read US Treasuries) in a productive manner.
Regardless of how governments act the essential thing is for the peoples of both countries to continue to find ways to partner together. We need each other in this critical time.
http://media.economist.com/images/20070811/D3207WW0.jpg
The US has become even more reliant on the Chinese government to purchase treasury bills and yet it continues to "demand" currency reform at the same time. There is a significant conflict between these two perspectives.
I feel that the root of the issue lies in American's limited understanding of China and a fear that China will become a future rival for the US. of course there is some truth in this possibility but at the same time there is also an opportunity to build a partnership between the US and China that could ield considerable mutual benefits for all parties.
The US should consider changing its view of China as a backward country rife with all manner of social and economic problems. Why not take an approach of creating a partnership with China to assist in resolving problems. Why not put aside the prejudices of history and consider forging a new path based on solving problems and creating a better future ?
I am not naive enough to think that things are easy to solve or that being a "nice guy" will resolve difficult issues, however the Chinese view of the US remains extremely positive...why not take up this mantle ?
There is no other country in the world that Chinese have more respect for than the US. This is a powerful opportunity that the US could grab and use as a base for building a partnership based on the future rather than the past.
The cartoon below from The Economist describes the current impasse but also suggests that the answer is just to open the flood gates...The US has to be responsible for the financial problems which originated in the US but the Chinese side needs to use its new financial "power" (read US Treasuries) in a productive manner.
Regardless of how governments act the essential thing is for the peoples of both countries to continue to find ways to partner together. We need each other in this critical time.
http://media.economist.com/images/20070811/D3207WW0.jpg
Wednesday, March 4, 2009
Inflation with Chinese Characteristics
The former leader Deng Xiaoping famously stated that China's modernization drive as "Socialism with Chinese Characteristics." This has become the code word for Capitalism in China.
This week and next week the Chinese parliament is meeting in Beijing to discuss the future direction of the country with a particular focus on the economy.
The initial reports suggest that there is considerable debate going on within the sub-committees regarding the potential for rapid inflation based on the government's large stimulus program and its aggressive prodding of banks to rapidly lend capital to major state owned enterprises.
The stimulus package is not well understood but it is known that the focus is on stimulating job creation for infrastructure projects to employ migrant workers laid off from export industries in China's southern provinces.
In China when a directive comes from the central government to take action action is taken. banks will lend and state owned enterprises will expand.
The difficulty is knowing when enough is enough. How much is too much ? How much is too little ?
China is not one economy but rather several regional economies. The coastal cities and the south have been the fastest growing economic centers over the past few years. This is now shifting to more inland provinces (which is where much of the infrastructure spending is being allocated). If the growth and capital availability is excessive these provinces could experience a rapid spike in inflation by year end or early 2010. This is not the result the government is seeking.
A period of inflation seems inevitable however. One can not pump such a large amount of new capital into the economy without suffering from a certain level of inflation. The government's credibility will be decided by when it turns OFF the flow of capital rather than the actual GDP growth figure.
An additional problem problem is to what extent the rapid rise in lending will cause bad debts to accumulate again in the large national banks. China has largely solved the bad debt problem but could be faced with another round of balance sheet adjustments as a result of stimulating the economy to thwart a further reduction in GDP growth.
The perils are great but if manged appropriately or at least modestly reducing the risk China could emerge from this global recession as a beacon rather than a backward semi-public, semi-private economy.
Time will tell.
This week and next week the Chinese parliament is meeting in Beijing to discuss the future direction of the country with a particular focus on the economy.
The initial reports suggest that there is considerable debate going on within the sub-committees regarding the potential for rapid inflation based on the government's large stimulus program and its aggressive prodding of banks to rapidly lend capital to major state owned enterprises.
The stimulus package is not well understood but it is known that the focus is on stimulating job creation for infrastructure projects to employ migrant workers laid off from export industries in China's southern provinces.
In China when a directive comes from the central government to take action action is taken. banks will lend and state owned enterprises will expand.
The difficulty is knowing when enough is enough. How much is too much ? How much is too little ?
China is not one economy but rather several regional economies. The coastal cities and the south have been the fastest growing economic centers over the past few years. This is now shifting to more inland provinces (which is where much of the infrastructure spending is being allocated). If the growth and capital availability is excessive these provinces could experience a rapid spike in inflation by year end or early 2010. This is not the result the government is seeking.
A period of inflation seems inevitable however. One can not pump such a large amount of new capital into the economy without suffering from a certain level of inflation. The government's credibility will be decided by when it turns OFF the flow of capital rather than the actual GDP growth figure.
An additional problem problem is to what extent the rapid rise in lending will cause bad debts to accumulate again in the large national banks. China has largely solved the bad debt problem but could be faced with another round of balance sheet adjustments as a result of stimulating the economy to thwart a further reduction in GDP growth.
The perils are great but if manged appropriately or at least modestly reducing the risk China could emerge from this global recession as a beacon rather than a backward semi-public, semi-private economy.
Time will tell.
Shanghai Spring
Spring in Shanghai seems far away after nearly two weeks of constant rain and cold weather !
Usually by now warm weather has arrived and the trees are blossoming ! This year we seem to be locked in a perpetual cold front which won't break.
There are sporadic signs of spring including birds in the trees and random blossoms but the mood remains grim after so much rain and so many cloudy days !
Air quality seems to be improved over last year although it is hard to measure.
The city continues to be undergoing a major face lift in preparation for next year's World Fair which will open in the late spring in PuDong along the Huang Pu River. It seems that city districts have been given a clear directive to upgrade the facades of as many buildings as possible. new construction continues but more effort seems to be focused on renovation and upgrades.
Tickets went on sale this week for the World's Fair which is a sign that the final push is on to complete the construction and landscaping at the Fair location. The landmark building for the Fair is nearing completion. Transportation lines - subways and light rail are in their final months of construction.
This should really bring Shanghai on to the world stage as China's pre-eminent international city.
In the meantime we wait for warm dry weather !
Usually by now warm weather has arrived and the trees are blossoming ! This year we seem to be locked in a perpetual cold front which won't break.
There are sporadic signs of spring including birds in the trees and random blossoms but the mood remains grim after so much rain and so many cloudy days !
Air quality seems to be improved over last year although it is hard to measure.
The city continues to be undergoing a major face lift in preparation for next year's World Fair which will open in the late spring in PuDong along the Huang Pu River. It seems that city districts have been given a clear directive to upgrade the facades of as many buildings as possible. new construction continues but more effort seems to be focused on renovation and upgrades.
Tickets went on sale this week for the World's Fair which is a sign that the final push is on to complete the construction and landscaping at the Fair location. The landmark building for the Fair is nearing completion. Transportation lines - subways and light rail are in their final months of construction.
This should really bring Shanghai on to the world stage as China's pre-eminent international city.
In the meantime we wait for warm dry weather !
Tuesday, March 3, 2009
Direct From China Daily on 8% GDP Growth in 2009
The media always has an angle...below is the full text from an article today on China's ability to meet the 8% GDP growth target for 2009....It is impossible to predict what will happen but this is the current line.
China may attain its targeted 8 percent economic growth, or even higher,
this year, prominent Chinese economist Li Yining said Tuesday.
this year, prominent Chinese economist Li Yining said Tuesday.
The Chinese economy is also very likely to recover before other major economies, even though the world economy is still shrouded in
uncertainty, said Li, a member of the 11th National Committee of the
Chinese People's Political Consultative Conference (CPPCC), the nation's
top political advisory body.
"The economic slowdown is beginning to bottom out, and the economy is bound to rebound on huge government investment," said Li,
According to a survey of factories issued Monday by the brokerage CLSA, China's manufacturing activity contracted for a seventh consecutive
month in February, but at a slower rate than previous months.
"The growth may not be very high, but won't stay around six percent,"
Li said, "this year's growth could reach eight percent or even higher."
China's economic growth slowed to 6.8 percent in the fourth
quarter of 2008, dragging down the annual rate to a seven-year low of 9 percent, as the unfolding global financial crisis takes a toll on the national economy.
Since last October, the government has announced several aggressive measures to bolster domestic demand and increase investment,
including a 4 trillion yuan ($585.5 billion) stimulus plan, a plan to
expand rural consumption of home appliances and support plans for
key industries.
Li, who has been a political advisor for more than 20 years, said the attainment of a 8-percent growth would be decided by two factors:
a boost in domestic demand and changes in the global economy.
The 8-percent growth was entirely within reach if domestic investment
and consumption could be spurred to support the growth, he said.
"However, the developments of the global economy is not up to our country," he added.
The economist who had proposed the ongoing shareholding system
reform in China also said the country should be able to see an early
recovery.
"Our problems is not as complicated as in other countries," he said, "
and China's focus on expanding domestic demand could foster future growth, although our exports may have to depend on overseas demands."
However, the country needed to enhance agricultural productivity so as to increase farmers' income and to put both rural and urban residents
under the umbrella of the social security network before the domestic
demand could take off, Li said.
"Farmers' contribution to the economy could be huge if their income are raised to a higher level, given the large number of farmers," he said.
Of China's total 1.3 billion population, more than 900 million are farmers.
"Reforms of the pension system, education and medical insurance should keep up with the economic growth to increase people's willingness to
spend," Li added.
He said the public should have faith in the government's ability to
stimulate the economy. "There is no doubt about that."
The 79-year-old economist said the fundamentals of the economy
remained unchanged, and difficulties of exporters are results of a crisis originated outside the country.
"The country needed to promote innovation, industrial upgrade and economic restructuring in its efforts to bolstering the economy, and
these measures could not only ensure the economic growth, but
also improve the growth quality." he advised.
The professor with the Peking University said employment should be the country's top priority. The recovery of job creation is usually behind
that of economic growth, he warned.
China said it aimed to create jobs for nine million people this year. "It
is not an easy target, but the country is actively finding ways to make it happen," he said.
About 20 million of China's migrant workers have returned home after
losing their jobs as the global financial crisis takes its toll on the economy.
National People's Congress
Today China's national congress opens its session. We will see a surge of reports and new policies over the coming two weeks emerge from this year's session. The focus will be on the economy.
A comment from Today's China Daily signals the primary economic policy:
"National Committee members from the non-public sector of the economy should be encouraged to shoulder their share of social responsibilities," according to the Report on the Work of the Standing Committee of the CPPCC National Committee.
This is code for asking the private sector NOT to pay off workers and staff in the current downturn. The problem with this "request" is that private industries are not being given government subsidies or incentives to retain their workforce. They are not being given bank loans under the new looser lending policies.
The result of this policy could be a new round of friction between government-backed enterprises and private enterprises. When the tide is helping all boats rise private industry is the hero. When the tide recedes private industry is asked to be socially responsible. The friction is obvious.
In the US the government is bailing out the private sector - Autos, Banks, Wall Street...
In China the government is backing state owned enterprises with ready capital and cash and asking private industry to tighten its belt and "help out."
The result in a few years could be a stronger government controlled economy in both China AND the US. This could mean that both the US and China economies will under go dramatic change...For private businesses this means that working wth government stakeholders will become much more important than in the past !
Sunday, March 1, 2009
What's Going on with the Chinese Economy ?
The Chinese economy continues to slow due to the global recession. What is different here is that China is not battling a structural problem but rather a slow down. China's financial system remains the same as before the recession started. This is the primary difference between China and the rest of the world.
In the 1920s and 1930s the US depression did not have the benefit (or the challenge) of a gloabl interconected media. News was not as ubiquitous as it is today. The Media did not have a strangle hold on setting people's expectations about recovery or the depth of the problem.
Today the Media is a critical player in people's expectations. The Media can raise or dampen people's expectations or hopes very easily if they do not have direct knowledge and experience of a given situation.
China's current economic situation is a good example.
When times were good from 2002 - 2008 the Media questioned China's rapid economic advancement stating that it was not a rapid nor as thorough as stated. There is of course some truth to this, however now the Media is pressing the point that China's economy is also not as rosy as stated. Regardless of the perspective the Media is terribly under informed.
My view is that China is experiencing a slow down. This is a fact. China is however NOT experiencing a structural economic problem. The US and the West are going through a major change in the structure of the economy. The preponderance of debt-driven growth is now coming home to roost. The West is faced with a goliath of a problem of considering how to reignite growth.
Taking a 36% stake in CITI bank is a good example of the revolutionary changes at work in the US. One year ago this would have been unheard of. The media in particular would have launched at such a suggestion. Today it is a reality that is being welcomed by the stock market as a necessary action.
China on the other hand is not changing its structure in reaction to the current crisis. it is using its existing financial system and government policy ability to manage throught the slow down. it is not changing its structure.
As a student of Chinese history I am aware that major events and major shifts in China are often a result of outside influences rather than internal manifestations. China's entrance into the WTO was the major catalyst for the lat 8 years of rapid expansion. Today's global problems will also give China the opportunity to reform and refine its policies and system to meet the challenges of the next 10 years.
On this point China can be praised as being open to identifying these major outside influences and reacting to them. The reaction is not always correct but at a minimum it causes change and change creates progress.
So my bottom line is that China's slow down is not a systemic problem. It is a shift rather than a revolution. It is not the crash and burn situation often described in the West.
A final note...China's problems remain as before. The difference is that these problems are turning into advantages rather than shortcomings !
Wait long enough and everything comes back into fashion !
In the 1920s and 1930s the US depression did not have the benefit (or the challenge) of a gloabl interconected media. News was not as ubiquitous as it is today. The Media did not have a strangle hold on setting people's expectations about recovery or the depth of the problem.
Today the Media is a critical player in people's expectations. The Media can raise or dampen people's expectations or hopes very easily if they do not have direct knowledge and experience of a given situation.
China's current economic situation is a good example.
When times were good from 2002 - 2008 the Media questioned China's rapid economic advancement stating that it was not a rapid nor as thorough as stated. There is of course some truth to this, however now the Media is pressing the point that China's economy is also not as rosy as stated. Regardless of the perspective the Media is terribly under informed.
My view is that China is experiencing a slow down. This is a fact. China is however NOT experiencing a structural economic problem. The US and the West are going through a major change in the structure of the economy. The preponderance of debt-driven growth is now coming home to roost. The West is faced with a goliath of a problem of considering how to reignite growth.
Taking a 36% stake in CITI bank is a good example of the revolutionary changes at work in the US. One year ago this would have been unheard of. The media in particular would have launched at such a suggestion. Today it is a reality that is being welcomed by the stock market as a necessary action.
China on the other hand is not changing its structure in reaction to the current crisis. it is using its existing financial system and government policy ability to manage throught the slow down. it is not changing its structure.
As a student of Chinese history I am aware that major events and major shifts in China are often a result of outside influences rather than internal manifestations. China's entrance into the WTO was the major catalyst for the lat 8 years of rapid expansion. Today's global problems will also give China the opportunity to reform and refine its policies and system to meet the challenges of the next 10 years.
On this point China can be praised as being open to identifying these major outside influences and reacting to them. The reaction is not always correct but at a minimum it causes change and change creates progress.
So my bottom line is that China's slow down is not a systemic problem. It is a shift rather than a revolution. It is not the crash and burn situation often described in the West.
A final note...China's problems remain as before. The difference is that these problems are turning into advantages rather than shortcomings !
Wait long enough and everything comes back into fashion !
Thursday, January 22, 2009
China's Economy Slows
From China Daily:
China's economy expanded 9 percent year-on-year in 2008, the lowest rate since 2001. The nation's gross domestic product for 2008 amounted to 30.07 trillion yuan, according to figures released Thursday morning by the National Bureau of Statistics (NBS).
GDP growth in the fourth quarter of 2008 slowed to 6.8 percent year-on-year, the lowest quarterly increase since 1997 Asia financial crisis.
Other economic indicators released together with the GDP include:
l. The consumer price index which measures inflation rose 5.9 percent year-on-year, the highest in 12 years, NBS figures showed.
2. Retail sales expanded 21.6 percent last year. The growth rate is 4.8 percentage points higher than 2007.
3. Industrial output grew 12.9 percent in 2008, down from 18.5 percent in 2007.
4. Fixed asset investment surged 25.5 percent in 2008, up from 24.8 percent in 2007.
5. The economy created 11.13 million new job opportunities in 2008. However, urban registered unemployment rate rose to 4.2 percent last year, up from 4 percent in 2007.
6. Producer price index rose 6.9 percent in 2008, up 3.8 percentage points from 2007.
However, producer price index dropped 1.1 percent in last December, a signal of deflation.
China's economy expanded 9 percent year-on-year in 2008, the lowest rate since 2001. The nation's gross domestic product for 2008 amounted to 30.07 trillion yuan, according to figures released Thursday morning by the National Bureau of Statistics (NBS).
GDP growth in the fourth quarter of 2008 slowed to 6.8 percent year-on-year, the lowest quarterly increase since 1997 Asia financial crisis.
Other economic indicators released together with the GDP include:
l. The consumer price index which measures inflation rose 5.9 percent year-on-year, the highest in 12 years, NBS figures showed.
2. Retail sales expanded 21.6 percent last year. The growth rate is 4.8 percentage points higher than 2007.
3. Industrial output grew 12.9 percent in 2008, down from 18.5 percent in 2007.
4. Fixed asset investment surged 25.5 percent in 2008, up from 24.8 percent in 2007.
5. The economy created 11.13 million new job opportunities in 2008. However, urban registered unemployment rate rose to 4.2 percent last year, up from 4 percent in 2007.
6. Producer price index rose 6.9 percent in 2008, up 3.8 percentage points from 2007.
However, producer price index dropped 1.1 percent in last December, a signal of deflation.
Tuesday, January 6, 2009
Circles Circles Circles
In the age old dance that is Guan Xi (relationships) one's circle is the base of all relationships. Who one associates with defines one's position. The higher the profile of the circle's participants the higher one's personal stature.
An influential circle can have many different types of members with different backgrounds and different circles of their own. A circle begins with one's family and extended family and widens out to include close and distant relatives.
If your circle is a wealthy or influential one you will be constantly asked to use the relationships in your circle(s) to help and influence people who might need help from your circle. One ahs an obligation to use the circle where possible. The use of one's circle is in itself an expansion of your own circle.
Creating a debt by helping someone inside or outside your circle creates a future opportunity to call that debt for a future purpose or requirement. Some will deliberately "help" others in order to create this future opportunity. Conversely some will refuse help so as not to have an obligation to return the favor in the future.
There are government circles - helpful with business.
There are circles that revolve around police and public security - useful with run ins with the "authorities"
There are circles for education - useful in getting children into better schools.
Foreigners can be a circle - useful for international business and overseas study.
The wide and more influential the circle the more one is able to accomplish. Success usually never depends on one's own individual ability but rather on the strength of one's relationship circle. In fact individuals are often judged based on the quality of their circle rather than their individual abilities and personal successes.
Creating a circle requires investment in time and money. It takes time to meet people and get to know them. It takes time to create debts and have them repaid. Circles grow over years and years of interaction and effort.
Creating a circle also costs money. Mostly for meals, drinks and other entertainment. Investing in a circle brings future rewards not immediate rewards. But when a circle is operating a peak efficiency it can produce immediate results.
One of the most powerful circle in China comes through one's education. From elementary school students are bound together in "classes." Each class has a class monitor who acts as the class leader. These are usually the best students. From this time forward the circle created with "classmates" becomes a baseline circle on which new circles are created.
High School classmate, University classmate, these are very common and critically important circles. Individuals utilize these circles for years and years to expand their own circles and create opportunities to accomplish tasks.
Another extremely strong circle is one's hometown. If two Chinese are from the same hometown and speak the same dialect then they are instant friends and instantly share their circles. Since nearly every Chinese speaks both Mandarin and their local dialect, this bond is extremely strong and can be extremely useful.
The essential point here is to understand that China is not monolithic. It is instead a collection of very diverse circles operating together for both personal and mutual benefit.
If one is doing business in China one needs one's own circle. Without a circle one remains on the outside circle-less !
An influential circle can have many different types of members with different backgrounds and different circles of their own. A circle begins with one's family and extended family and widens out to include close and distant relatives.
If your circle is a wealthy or influential one you will be constantly asked to use the relationships in your circle(s) to help and influence people who might need help from your circle. One ahs an obligation to use the circle where possible. The use of one's circle is in itself an expansion of your own circle.
Creating a debt by helping someone inside or outside your circle creates a future opportunity to call that debt for a future purpose or requirement. Some will deliberately "help" others in order to create this future opportunity. Conversely some will refuse help so as not to have an obligation to return the favor in the future.
There are government circles - helpful with business.
There are circles that revolve around police and public security - useful with run ins with the "authorities"
There are circles for education - useful in getting children into better schools.
Foreigners can be a circle - useful for international business and overseas study.
The wide and more influential the circle the more one is able to accomplish. Success usually never depends on one's own individual ability but rather on the strength of one's relationship circle. In fact individuals are often judged based on the quality of their circle rather than their individual abilities and personal successes.
Creating a circle requires investment in time and money. It takes time to meet people and get to know them. It takes time to create debts and have them repaid. Circles grow over years and years of interaction and effort.
Creating a circle also costs money. Mostly for meals, drinks and other entertainment. Investing in a circle brings future rewards not immediate rewards. But when a circle is operating a peak efficiency it can produce immediate results.
One of the most powerful circle in China comes through one's education. From elementary school students are bound together in "classes." Each class has a class monitor who acts as the class leader. These are usually the best students. From this time forward the circle created with "classmates" becomes a baseline circle on which new circles are created.
High School classmate, University classmate, these are very common and critically important circles. Individuals utilize these circles for years and years to expand their own circles and create opportunities to accomplish tasks.
Another extremely strong circle is one's hometown. If two Chinese are from the same hometown and speak the same dialect then they are instant friends and instantly share their circles. Since nearly every Chinese speaks both Mandarin and their local dialect, this bond is extremely strong and can be extremely useful.
The essential point here is to understand that China is not monolithic. It is instead a collection of very diverse circles operating together for both personal and mutual benefit.
If one is doing business in China one needs one's own circle. Without a circle one remains on the outside circle-less !
Monday, January 5, 2009
Another Perspective From Another Blog on China !!
The China Economy For Foreign Companies
Posted by Dan on January 4, 2009 at 01:13 PM
I was interviewed a couple weeks ago by a reporter who wanted to know what impact the declining economy in China was having on my law firm's clients. I told her none. I said that so far, anyway, not a single client had even mentioned China's declining economy as a factor in its decision-making. But I then said that I had also not really been asking and that about half our clients are not in manufacturing, and that virtually none of our manufacturing clients make low end products like $2 toys, socks, or costume jewelry. I also mentioned that less than ten percent of our manufacturing clients are in Guangdong Province, which seems to have been hardest hit.
Since that interview, I have conducted an extremely unscientific client survey regarding our clients' China plans. This survey was of about fifteen clients (to tell you how unscientific it was, I took no notes), eleven of which are American, one Korean, one Spanish, one Mexican, and one German. About half are in manufacturing and none make what anyone would describe as a low end good like a cheap toy or jewelry. I asked them how their China business was going, "in light of the economic downturn." I also asked them if the downturn was going to cause them to reduce or eliminate their China presence. Lastly, I asked them what the would be doing differently in China in 2009 due to the economic downturn. Their answers were all pretty much the same.
They said that China's downturn had made them look more carefully at their China expansion and hiring plans. They said they were going to be very "cautious" and "careful" in 2009 with respect to expansion and hiring. Many of them (5 or 6?) said they had an "official" hiring freeze in place for the first six months of 2009 or the entire year. Two said they were going to expand faster than anticipated in China because they saw now as the best time to get a jump on their less well-funded rivals. All of them said they had no concrete plans to get out of China, but one worried that the company's overall problems might force an ill-advised China exit. Many of them responded to my question about their leaving China by asking me "and go where?" I got the following comments (these are from the last few months, not just from these 15 or so companies):
1. This downturn is good. It is going to bring us stability. We had been losing 2-3 good employees every month and that has stopped completely.
2. I hated China's new labor law and I hated how employees were able to hold this over our heads. The power has shifted.
3. I have enjoyed my last six months in China more than any six month period in my 20 years here. We are a small fish in a big pond (they are in Shanghai) and I feel like the government actually appreciates that we are sticking it out and have not laid off anyone.
4. China is the only country in which our company is still doing well.
5. We had made some terrible deals because we had no choice. We have been able to renogoiate nearly all of them. Our costs are down, and our sales are down, but our profits have remained the same.
6. We looked at Vietnam and really liked what we saw, and we definitely plan to add that to our China operations eventually, but nobody wants to spend the money to get set up there right now. Maybe in a year or two.
7. I'm just glad we are no longer in Thailand.
8. Our R&D in China has been fantastic. We want to expand and we should be expanding, but the company has a complete freeze on anything new right now. I see this as a huge mistake and one that is going to cost us millions down the road.
9. Our sales are down 20% worldwide. Nobody wants to leave China because we all know we will make good money here soon, but the question is whether the home office will be able to subsidize us until we do.
Upside Down - Rightside Up
Nearly everyone is discussing how the first half of 2009 will develop. Will the Chinese economy continue its slide ? Will the US planned stimulus package ignite consumption in the US and reignite the Chinese export engine ? How will the globalized economy re-balance itself ?
As a student of history I find the current interdependent economic relationship between China and the United States to be a revolutionary "turning of the tables."
Think back to 2006, 2007 and early 2008 when the western Media was shouting as loud as possible about all of the problems in China. Human Rights problems. Centralized economic planning problems. IP theft and unfair treatment of private entrepreneurs. One Family Child policies.....the list goes on and on.
Now the table is upside down.
Western countries and particularly the United States "NEED" China's economic output. They need China's contribution to the global GDP. They need China to be stable and productive not introspective and unstable.
Private business around the world operate on a base of cordial government-to-government relationships. The US and China have an historic opportunity to become true partners. Together these two countries could single handedly create the spark needed to restart the global economy.
China is already the single largest underwriter of the US deficit. Why not build on this relationship by creating additional cross-national investment opportunities ?
US technology is driving the Chinese high technology sector. Why not open up this channel even more by providing subsidies and other incentives for companies to export more technology to China ?
There are many ways that these two nations can work together. If Obama gets the good advice that he deserves as the "Change" president he will look beyond the media hype of communism and democracy and focus on strengthening people's daily lives through both domestic and international programs.
The US is at risk of isolating itself. China has opened up to the world. isn't this an opportunity for a new kind of global growth ?
There is no other country in the world better positioned to be a productive trade and economic partner with the United States other than China ! We all hope Obama comes to China soon and starts the process of "change."
As a student of history I find the current interdependent economic relationship between China and the United States to be a revolutionary "turning of the tables."
Think back to 2006, 2007 and early 2008 when the western Media was shouting as loud as possible about all of the problems in China. Human Rights problems. Centralized economic planning problems. IP theft and unfair treatment of private entrepreneurs. One Family Child policies.....the list goes on and on.
Now the table is upside down.
Western countries and particularly the United States "NEED" China's economic output. They need China's contribution to the global GDP. They need China to be stable and productive not introspective and unstable.
Private business around the world operate on a base of cordial government-to-government relationships. The US and China have an historic opportunity to become true partners. Together these two countries could single handedly create the spark needed to restart the global economy.
China is already the single largest underwriter of the US deficit. Why not build on this relationship by creating additional cross-national investment opportunities ?
US technology is driving the Chinese high technology sector. Why not open up this channel even more by providing subsidies and other incentives for companies to export more technology to China ?
There are many ways that these two nations can work together. If Obama gets the good advice that he deserves as the "Change" president he will look beyond the media hype of communism and democracy and focus on strengthening people's daily lives through both domestic and international programs.
The US is at risk of isolating itself. China has opened up to the world. isn't this an opportunity for a new kind of global growth ?
There is no other country in the world better positioned to be a productive trade and economic partner with the United States other than China ! We all hope Obama comes to China soon and starts the process of "change."
Sunday, January 4, 2009
China is Catching An Economic Cold
Unlike in the United States where a financial crisis spawned a credit freeze and then an entire economic slowdown, the situation in China is quite different.
China has not experienced a financial crisis nor a financial system meltdown. Rather China's current economic problems are focused on a rapid and dramatic slowdown in manufacturing output. Manufacturing output has contracted for five months in a row and is expected to continue to contract in the first half of 2009.
Simply put the majority of the customers for China's manufacturing output were in the US, Europe and Japan. Now that these customers are not purchasing goods at the same rate output is falling. No customers, no production...just inventory.
With factories slowing down or closing suppliers of raw materials are also reducing output as demand shrinks and prices fall.
Back when recessions were more easily forecast analysts would generally be able to predict when a recovery wold begin. The problem with today's predicament is that the entire world system has slowed to a snail's pace.
The world economy needs a catalyst to spark demand and get the system rolling again.
It seems that China's major $600 billion stimulus package could prove to be a possible stimulus however it may be misdirected because the factories that are closing were primarily shipping product to international customers. A Chinese domestic stimulus package that does not stimulate consumer purchasing may not be the answer.
On the other side of the Pacific the new President (Obama) is pushing for an even larger stimulus package which may come in at $1 Trillion dollars. This package will certainly be targeted at consumers in order to encourage them to start purchasing again. It is unclear if it will be successful and how long it will take to reach the heart of the problem.
Regardless, the first six months of 2009 look like a very difficult time in China. The stimulus packages will not take root that quickly, production will continue to slow, unemployment will rise. Until customers start showing up again it will remain difficult.
On the good news front....the Chinese government has implemented significant reforms in the Real Estate sector which should stimulate the purchase of new apartments or second/third apartments. This could provide an economic stimulus to industry sectors associated with the Real Estate market.
For now Chinese consumers are holding on to their cash waiting for the storm to pass. When it does pass I firmly believe there will be a tidal wave of new investment coming from pent up demand for higher returns.
The next bubble ?....
China has not experienced a financial crisis nor a financial system meltdown. Rather China's current economic problems are focused on a rapid and dramatic slowdown in manufacturing output. Manufacturing output has contracted for five months in a row and is expected to continue to contract in the first half of 2009.
Simply put the majority of the customers for China's manufacturing output were in the US, Europe and Japan. Now that these customers are not purchasing goods at the same rate output is falling. No customers, no production...just inventory.
With factories slowing down or closing suppliers of raw materials are also reducing output as demand shrinks and prices fall.
Back when recessions were more easily forecast analysts would generally be able to predict when a recovery wold begin. The problem with today's predicament is that the entire world system has slowed to a snail's pace.
The world economy needs a catalyst to spark demand and get the system rolling again.
It seems that China's major $600 billion stimulus package could prove to be a possible stimulus however it may be misdirected because the factories that are closing were primarily shipping product to international customers. A Chinese domestic stimulus package that does not stimulate consumer purchasing may not be the answer.
On the other side of the Pacific the new President (Obama) is pushing for an even larger stimulus package which may come in at $1 Trillion dollars. This package will certainly be targeted at consumers in order to encourage them to start purchasing again. It is unclear if it will be successful and how long it will take to reach the heart of the problem.
Regardless, the first six months of 2009 look like a very difficult time in China. The stimulus packages will not take root that quickly, production will continue to slow, unemployment will rise. Until customers start showing up again it will remain difficult.
On the good news front....the Chinese government has implemented significant reforms in the Real Estate sector which should stimulate the purchase of new apartments or second/third apartments. This could provide an economic stimulus to industry sectors associated with the Real Estate market.
For now Chinese consumers are holding on to their cash waiting for the storm to pass. When it does pass I firmly believe there will be a tidal wave of new investment coming from pent up demand for higher returns.
The next bubble ?....
Saturday, January 3, 2009
The Rush Has Begun
The rush to return home to rural hometowns has started in China - a bit early this year because of the economic slowdown.
18 million people will travel by train between now and early February. That is an 18% increase over last year.
That is nearly equivalent to the population of Shanghai ! It is three times the population of New York City !
Beijing railway departures have already reached 300,000 per day ! Railway stations are selling 30,000 to 50,000 tickets per day !
These numbers are amazing by western standards. It is no wonder that the central government continues to invest in building more railways and more subways !
18 million people will travel by train between now and early February. That is an 18% increase over last year.
That is nearly equivalent to the population of Shanghai ! It is three times the population of New York City !
Beijing railway departures have already reached 300,000 per day ! Railway stations are selling 30,000 to 50,000 tickets per day !
These numbers are amazing by western standards. It is no wonder that the central government continues to invest in building more railways and more subways !
Friday, January 2, 2009
Red and Expert
During the Cultural Revolution there was a common slogan calling on people to be both "Red" and "Expert."
To be "Red" meant to be politically correct - to support the revolutionary objectives as defined by the Communist Party. These political objectives changed frequently so to be "Red" was quite a difficult task. People were challenged to "test" the political winds on a daily basis. often when the winds changed the definition of "Red" shifted from white ro black and from black to white.
To be "Expert" meant to be a specialist. An expert in a particular area. An expert was someone who was recognized as having specific and unique skills.
The balance between "Red" and "Expert" was less of a balance and more of a process to maintain one's "expert" status while being acceptably politically "Red."
I have always been puzzled by this until a friend pointed out that the real purpose of being both "Red and Expert" was to find a socially and politically acceptable balance which enabled an individual to maintain their social ranking as a non-political person in a highly political environment.
Many years later I have come to understand that the real significance of this "red and Expert" slogan was to provide a new social stratum. In Chinese society people are stratified from birth into a "track" which will potentially define the remainder of their lives.
Examples include:
Rural vs. Urban:
To be born into a rural family defines one's future in nearly every way. Rural Chinese have a specific definition. They are considered to be less educated, less sophisticated, occupying a lower social position than their urban cousins.
To be born into an urban family provides one with an a priori more beneficial position in Chinese society. One has more choices. One has more options. Rural Chinese respect urbanites but they also resent them.
This conflict is in many ways a natural one in many societies around the world. What differs in China is that there are fewer options for rural Chinese to cross over into an urban environment. A motivated rural young man or woman dreams of moving to the city but is often stymied by prejudice and an inability to shift their household registration to an urban location.
Higher Education vs. Vocational Education:
There are not enough seats in Chinese universities to satisfy the demand from applicants. There is not enough support from the government (education is still a government activity). There are not enough qualified teachers and professors.
Thus, a rigorous examination system is used to filter out "qualified students." The university entrance examination filter begins in elementary school. Students who are selected to enroll in "Key" schools are already on the university track. Movement from one grade to another is determined by year-end examinations. Good grades result in continuing to be tracked in the "Key" school path.
Once students reach their junior year in high school they spend their final year preparing for the university examinations. During regular classes and after school these students are among the most pressurized students in China. The family's future is dependent on how well students test !
The over emphasis on testing results in an education system characterized by memorization rather than creative learning. There is no time for creative learning when one's future is dependent on good test grades.
Rural students have, by definition, less access to the university track. There are however "affirmative action" like policies for minorities as well as poorer areas of China. Regardless of these policies students proceed only by achieving the highest possible test scores.
Family Structures:
The family in China is the basic social structure. Each member of the family acts within a predetermined hierarchy. This hierarchy is 3,000 years old. It is rooted in deference for elders. Each member of the family has a clear role to play in this structure.
From the time a new child is born into a family they are taught the roles and responsibilities of how the family structure works. Whether it is deference to grandparents or responsibility to support parents in their older age the roles and responsibilities are taught and reinforced inside the family on a daily basis. Thus the ties that bind a family together are learned by children as part of their upbringing. It becomes a natural part of the family rhythm.
Generalist vs. Specialist:
There are very few generalists in China. The population is too large. There is no need for people to be competent or capable across many different skills or abilities. It is more common that individuals are specialists in their viewpoints and capabilities.
The generalist or the liberal educated well rounded person is much less common in China.
The specialist who understands every detail of a skill or ability is everywhere in China. What ever the skill the person is considered an expert but ask that person about broader subjects and there is limited knowledge or ability.
In the west where the Individual is pre-eminent one succeeds by being more of a generalist because there is more emphasis on self-reliance.
In China where the Group is pre-eminent one succeeds by providing a key specialized skill or ability that can be woven together with the other members of the group to produce a positive outcome.
Whether one seeks to be Red or Expert, the choice is most likely based on one's surroundings - one's social environment.
To be "Red" meant to be politically correct - to support the revolutionary objectives as defined by the Communist Party. These political objectives changed frequently so to be "Red" was quite a difficult task. People were challenged to "test" the political winds on a daily basis. often when the winds changed the definition of "Red" shifted from white ro black and from black to white.
To be "Expert" meant to be a specialist. An expert in a particular area. An expert was someone who was recognized as having specific and unique skills.
The balance between "Red" and "Expert" was less of a balance and more of a process to maintain one's "expert" status while being acceptably politically "Red."
I have always been puzzled by this until a friend pointed out that the real purpose of being both "Red and Expert" was to find a socially and politically acceptable balance which enabled an individual to maintain their social ranking as a non-political person in a highly political environment.
Many years later I have come to understand that the real significance of this "red and Expert" slogan was to provide a new social stratum. In Chinese society people are stratified from birth into a "track" which will potentially define the remainder of their lives.
Examples include:
Rural vs. Urban:
To be born into a rural family defines one's future in nearly every way. Rural Chinese have a specific definition. They are considered to be less educated, less sophisticated, occupying a lower social position than their urban cousins.
To be born into an urban family provides one with an a priori more beneficial position in Chinese society. One has more choices. One has more options. Rural Chinese respect urbanites but they also resent them.
This conflict is in many ways a natural one in many societies around the world. What differs in China is that there are fewer options for rural Chinese to cross over into an urban environment. A motivated rural young man or woman dreams of moving to the city but is often stymied by prejudice and an inability to shift their household registration to an urban location.
Higher Education vs. Vocational Education:
There are not enough seats in Chinese universities to satisfy the demand from applicants. There is not enough support from the government (education is still a government activity). There are not enough qualified teachers and professors.
Thus, a rigorous examination system is used to filter out "qualified students." The university entrance examination filter begins in elementary school. Students who are selected to enroll in "Key" schools are already on the university track. Movement from one grade to another is determined by year-end examinations. Good grades result in continuing to be tracked in the "Key" school path.
Once students reach their junior year in high school they spend their final year preparing for the university examinations. During regular classes and after school these students are among the most pressurized students in China. The family's future is dependent on how well students test !
The over emphasis on testing results in an education system characterized by memorization rather than creative learning. There is no time for creative learning when one's future is dependent on good test grades.
Rural students have, by definition, less access to the university track. There are however "affirmative action" like policies for minorities as well as poorer areas of China. Regardless of these policies students proceed only by achieving the highest possible test scores.
Family Structures:
The family in China is the basic social structure. Each member of the family acts within a predetermined hierarchy. This hierarchy is 3,000 years old. It is rooted in deference for elders. Each member of the family has a clear role to play in this structure.
From the time a new child is born into a family they are taught the roles and responsibilities of how the family structure works. Whether it is deference to grandparents or responsibility to support parents in their older age the roles and responsibilities are taught and reinforced inside the family on a daily basis. Thus the ties that bind a family together are learned by children as part of their upbringing. It becomes a natural part of the family rhythm.
Generalist vs. Specialist:
There are very few generalists in China. The population is too large. There is no need for people to be competent or capable across many different skills or abilities. It is more common that individuals are specialists in their viewpoints and capabilities.
The generalist or the liberal educated well rounded person is much less common in China.
The specialist who understands every detail of a skill or ability is everywhere in China. What ever the skill the person is considered an expert but ask that person about broader subjects and there is limited knowledge or ability.
In the west where the Individual is pre-eminent one succeeds by being more of a generalist because there is more emphasis on self-reliance.
In China where the Group is pre-eminent one succeeds by providing a key specialized skill or ability that can be woven together with the other members of the group to produce a positive outcome.
Whether one seeks to be Red or Expert, the choice is most likely based on one's surroundings - one's social environment.
Happy New Year - 2009 Year of the (Earth) Ox
The new year is upon us. When Chinese New Year arrives on January 26th it will officially be the Year of the Ox. People born in the Year of the Ox are typically described as:
"The Ox is the sign of prosperity through fortitude and hard work. This powerful sign is a born leader, being quite dependable and possessing an innate ability to achieve great things. As one might guess, such people are dependable, calm, and modest. Like their animal namesake, the Ox is unswervingly patient, tireless in their work, and capable of enduring any amount of hardship without complaint."
The world will need strong "Ox" people in the coming years to help put the global economy back together.
Given the after effects of the 2008 global financial and economic crisis the coming year is going to be more of a challenge for all of us. The delayed effect of the credit meltdown, the stock market "crash" but more importantly the crisis embodied in a loss of faith in what the future holds for our economy! We just do not know what the next quarter will bring. ! We need more "Ox" people !
From Shanghai 2009 seems like a year of possibilities. A year that leaves behind the problems of 2008:
The freak snow storm in south China in January.
The earthquake in Sichuan in March.
Unrest in Tibet in the spring
A troubled run up to the Olympics
Then the Olympics (a success) dragged the Beijing economy to a standstill
Then the financial crisis began to hit southern China
And finally economic challenges began to hit more broadly across China.
For a year that ended in the number "8" 2008 did not hold up to expectations. We can only hope that the imperial lucky number "9" will bring better luck to everyone !
Regardless the celestial predictors will be very busy between now and January 26th when the year of the Ox starts !
"The Ox is the sign of prosperity through fortitude and hard work. This powerful sign is a born leader, being quite dependable and possessing an innate ability to achieve great things. As one might guess, such people are dependable, calm, and modest. Like their animal namesake, the Ox is unswervingly patient, tireless in their work, and capable of enduring any amount of hardship without complaint."
The world will need strong "Ox" people in the coming years to help put the global economy back together.
Given the after effects of the 2008 global financial and economic crisis the coming year is going to be more of a challenge for all of us. The delayed effect of the credit meltdown, the stock market "crash" but more importantly the crisis embodied in a loss of faith in what the future holds for our economy! We just do not know what the next quarter will bring. ! We need more "Ox" people !
From Shanghai 2009 seems like a year of possibilities. A year that leaves behind the problems of 2008:
The freak snow storm in south China in January.
The earthquake in Sichuan in March.
Unrest in Tibet in the spring
A troubled run up to the Olympics
Then the Olympics (a success) dragged the Beijing economy to a standstill
Then the financial crisis began to hit southern China
And finally economic challenges began to hit more broadly across China.
For a year that ended in the number "8" 2008 did not hold up to expectations. We can only hope that the imperial lucky number "9" will bring better luck to everyone !
Regardless the celestial predictors will be very busy between now and January 26th when the year of the Ox starts !
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