This is China! blog

“The speed at which China is developing its road transport infrastructure is truly admirable. China currently has 3.5 million km (2.2 million miles) of road. More than half of that is low grade, according to Reuters. China had only 53,000 km of expressways in 2007. The country is intent on building 80,000 additional kilometers of expressway over the next ten years, surpassing the length of the continental United States interstate highway network. Of course, the development of the logistics infrastructure will have monumental affects on the ease and declining cost of shipping goods throughout the country, and to neighboring countries.

“However, China’s bridges seem to be falling down – or falling apart – almost as quickly as they put them up. The Henan Road bridge, a busy throughway that spans the Suzhou Creek in Shanghai, in mid-2009 developed cracks as long as four meters in length, with chunks falling off the structure shortly after renovaton. Workers from the company that built the bridge used garbage – including plastic foam and leather bags – mixed with glue to fill the yawning cracks. The workers repairing the newly-built 120-meter Hanzhongmen Bridge in Nanjing were less creative than the Suzhou Creek crew during December 2009, and simply poured superglue into cracks that were large enough to fit one’s hand through.

Read more of the article in my latest column on logistics and supply chain management, in the March/April issue of CHaINA Magazine …

A Chinese recently told me one of her uncles recently bought a 60 square meter (about 600 square feet) apartment for his son so the boy has the credibility to find a girlfriend. The assumption, of course, is that the girl will want to marry the boy because of the investment.

According to Xinhuanet: “The house of deceased pop star Michael Jackson was sold for 3.1 million dollars (around 21.2 million yuan). The price comes to only 14,000 yuan per sq m. That is much cheaper than Chinese houses. In January, housing prices stayed between 17,000 and 19,000 yuan per sq m in areas beyond the Fifth Ring Road in Beijing.”

The article attributes the stratospheric price tags to: Chinese devoting most of their resources toward buying a home; local government control of real estate companies that sell the homes; and banks which relish the interest from homeowner loans.

It’s a shame Jackson’s residence wasn’t in Beijing; his estate would have been able to pay off more of the King of Pop’s debts than the current purchase.

Previous posts:

Bubblicious

A Look Under the Hood at China’s Economic Engine

The Bubble Cometh

If it Looks Like a Bubble and It Smells Like a Bubble…

China is a Scam

I recently watched the 2-hour 20-minute long Hong Kong film Bodyguards and Assassins on DVD, and have to say I loved it. For one, it had many of my favorite Hong Kong actors – Donny Yen, Simon Yam, Jackie Cheung, and Nicholas Tse (who became one of my favorites because of how well he acted his role), among others; the film also had some well-choreographed action scenes. The film is about the  preparations involved in protecting Sun Yat Sen during his two-hour long visit to Hong Kong in 1906 to plot with intellectuals the overthrow of the Qing Dynasty, and the ensuing gauntlet of attempts on his life. Sun Yat Sen is the one Chinese leader both the Communist and the Nationalist Chinese agree on tried to do something good for all Chinese people. The entire film is explicit with the idea of Sun and his attempts to spread democracy throughout the Mainland in the final years of Empress Cixi’s reign. Cixi wants the former medical doctor dead dead dead. She sends a Qing official with illusions of grandeur and a mean kung fu kick to head up the legions of assassins who attempt to murder Sun and the rebellion before both are uncontrollable.

It’s a sad sad film that somehow made it through the censors in HK and on the Mainland, and is being very highly promoted (I saw clips of it played on a TV in a hyper-busy hyper-market just days before Spring Festival).

Definitely worth the watch. Viewer discretion advised: quite violent; bring your hankies.

Jeffrey Garten, a professor at Yale, has suggested that America in its weakened financial condition after the Great Recession of 2008-2009 should take to the same strategy of multi-lateral engagement with China. With the U.S. banking system discredited and two wars continuing to stretch its military and its finances, America is at a disadvantage in trying to balance out Chinese assertiveness. Instead, Garten suggests the United States should lead the way toward working with other nations to build international institutions, like the World Trade Organization (WTO),”where China is obliged to play by the rules that a number of leading countries have subscribed to, and which has an orderly process of adjudication. While it still has leadership clout, the centrepiece of US efforts ought to be marshalling multilateral support for other such arrangements.” Examples of such “captive multi-lateral” efforts include an enforceable international climate change treaty, internet operation and a strengthened global monetary system.

Further reading: FT

Previous posts:

China in Lilliput

Pulling a “Google” on China

National Malfeasance

The Global Times, the official English-language online newspaper of the Chinese government, recently published an expose about the arbitrariness closure of accounts on Chinese social networking sites and the wholesale shutdown of entire websites by authorities. The article, entitled” Publish and Be Deleted“, is as telling in its very existence as the content of its exhaustively interviewed article. Throughout the entire article bloggers and social networkers and even website managers talk about how arbitrarily applied censorship regulations are applied. Photos, poetry, commentary can all disappear from cyberspace in a matter of moments. The article also discusses the demise of the social networking phenomenon Fanfou, which authorities axed just after the Xinjiang riots, and Yeeyan, which translated internationalnews for Chinese domestic consumption. Yeeyan reopened after it simply stopped posting pieces on politics.

Further reading: WSJ

Previous posts:

Broken Web

Keeping Tabs on Netizens

When Big Brother Might Be Your Own Brother

How to be picked up by a Techno-chik in China

I just finished writing my next column for Eurobiz Magazine, on kick-backs in China operations. A lot of Chinese have made a lot of money by taking money under the table from corporate vendors without the knowledge of their employers. The Shanghaiist recently reported that most Chinese believe the super-rich in China obtained their wealth illicitly, or, at best, through relationships. Only 16% of Chinese believed wisdom and hard work actually made a difference in the ill-gotten gains. Nearly 70% of Chinese polled by the People’s Daily thought ill of the newly rich, who have a knack for gaudy and ostentatious shows of their newfound wealth. The report related an Australian journalist’s investigation into some of the sources of new-wealth, citing the story of a port authority in which ships need to pay authorities to offload their wares, or wait at sea indefinitely with all the costs incumbent in the delays. For foreign companies such delays can mean wrecked credibility or mounting debts.

Likely, the survey did not ask the question, “If you had the same opportunities to become newly rich in ways that would be considered immoral, would you take advantage of the opportunities?”

Previous posts:

Thou Shalt Not …

Kicking the Kick-back Habit

China’s Fantasy Football

The Financial Times recently had an excellent analysis entitled, “No One Home,” which opened with the exploration of a newly constructed, completely empty town outside Kunming, in Yunnan Province. Kunming, the capital of the province, has become crowded as the economic center of southwest China (while Chongqing and Chengdu battle for pre-eminence of central China). The town was built with local government funds ostensibly for the people from the countryside encouraged to move to cities. The example sets the stage for the argument as to whether China’s property market is a bubble or not.

I have no doubt China’s property market is bubbly. However, I do believe the market can and will be moderated to a point that property prices will level out over the near term. Not collapse. The problem, though, will be longer term. With more than US$1.7 trillion having gone out to local governments in 2009 – one-third of GDP – and very little transparency and accountability as to how the funds are being spent, China will almost certainly have to revivify the same toxic-loans corporations it had used to relieve its banks of the weight of non-performing loans. As one commentator cites, a 30 per cent default rate would in effect wipe out the paid-in capital of top banks such as China Construction Bank and Bank of China. I would not be at all surprised if the default rate is twice that amount, given the opaqueness of the loan process, the questionable rationale behind the Urban Development Investment Corporations the local governments set up to receive the bank loans, and the sheer volume of mid- to high-end real estate actually under construction or recently finished – property no one just off the farm can possibly afford.

Having taken this shotgun approach to revving up the economy as the world plunged into the global economic downturn, China has used up its ammunition. It’s leadership needs to audit the loan placements and ensure the projects developed with the money are actually being used for productive infrastructure projects – which, all agree, China’s interior in particular is still in dire need of. If manufacturing and service sector productivity do not actually increase in line with the largest fiscal stimulus the world has ever seen (during peacetime), then China will almost certainly head into a double dip recession.

And the world will hold its breath to see what else the Chinese leadership has in its bag of tricks.

Further reading: China at risk of home grown financial crisis; China hits back at Fitch, saying banks sound

Previous posts:

The Enron Effect and China

A Look Under the Hood at China’s Economic Engine

The Bubble Cometh

If it Looks Like a Bubble and It Smells Like a Bubble…

China is a Scam

One of the most gorgeous government office buildings I have seen anywhere in China lies in Jiangsu Province, near Shanghai. It’s architecture is an update of Chinese traditional architecture, all clean, straight lines, great panes of glass that frame courtyard gardens and water fountains. The architect, it seems, was American, interestingly. The building as a grand bit of modern art sits back off a busy highway with nothing else around it. Perhaps in a few years that will change as more construction projects grip the district.

One does have to wonder, though, if the budget for the building would pass the requirements just released for government officials’ expenditures. The central government has just released new guidelines on what justifies proper behavior on the part of officials. Party leaders are trying to show the public they are serious about curbing corruption within their ranks. Bans on lavish weddings and funerals may sound strange to us Westerners, but extravagant gatherings is a way in which Chinese show friends, family and neighbors they’ve made the big time. Luxury sedans are out, too; though who will be the poor sod on the local police force to tell a Vice Mayor he shouldn’t be riding around town in a Lexus? Government headquarters as posh as any resort are a no-no, too. Though they sure are nice to look at.

Further reading: BBC, Chinese anti-corruption website

Previous posts:

Kicking the Kick-back Habit

China’s Fantasy Football

The Human Flesh Search

Young Chinese I’ve talked with have told me the annual CCTV Spring Festival pageant, which State television shows every New Year’s Eve (by the lunar calendar), was desperately boring. I find it boring every year, but I’m typically the only one in the room who thinks so. Not this year, though. One twenty-something Chinese woman said she and her little brother sat awake until 1am waiting for the next performance to improve. They never did, and the siblings’ exhaustion levels and lack of enthusiasm the next day were all they had to show for it.

I asked another twenty-something friend what was the matter. She told me she thought central authority is simply falling out of touch with the expectations of the younger generations. “The show was more for the old Beijing officials than for the rest of us.” Even the modern dance sets, to appeal to younger audiences, we both felt, were ugly and stilted.

Previous posts:

The Power of the Twenty-somethings

Foreign IT companies are feeling less welcome than ever in China as the national government feels the country’s own sector is muscular enough to go it alone. On May 1, 2010 foreign companies that want to tender for government contracts will have to release their source code and security keys to government agencies for scrutiny. Central government wants to make its own information infrastructure secure against foreign intrusion, possibly pilfer leading-edge technology, and lock up its own domestic market to the exclusion of foreign players.

John Neuffer, vice-president for global policy at the Information Technology Industry Council, a lobby group, said: “The looming choice for many of our companies is to create costly bifurcated product lines, one for China and one for the rest of the world, or to ponder less ambitious trade and investment choices in that market.”

As China continues its turn inward, it endangers its ability to share in the information exchanges that flow through countries boosting Innovation. Ming Dynasty emperors did very much the same thing in breaking up the great commercial fleet of Zheng He, the shipyards in which the ships were built, and restricting the flow of activity across the Silk Road. Six hundred years later we may be hearing history’s echo.

Further reading: FT

Previous posts:

The Clever, the Genius and the Just Plain Dumb

Elementary, Watson

China’s Innovation Blowback