Chinese Economics Thread

[vesicles]

There have been for the last year and a half several warnings about this. Do you think china´s banks are heading for a big crisis? I think that china´s economy desperately needs more transparency and less interference from the government.

I don't think the involvement of the govn't in economy is as clear-cut as one might like to think. The argument over the dominance of govn't involvement has been going back and forth for decades and, to this day, has not been settled.

My personal view is that it depends on the state of a nation's initial economy. A minimal govn't involvement tends to stabilize an economy, more than anything else. So in an already well-developed economy like the US, little govn't involvement works fine. Even in the US, the govn't needs to step in a little bit more during hard time. In an economy that needs major improvement, like that of China's, minimal involvement of the govn't won't get you any where. Little oversight of an economy with poor financial infrastructure would mean disaster. To make a comparison, a well-built building needs little oversight and a little periodical maintenance would be fine. However, doing the same thing to a building with poor foundation would mean letting it collapse without helping it. That's why you always see some buildings in bad shape with scaffolding. govn't involvement is like the scaffolding that would help keep the building up while people attempt to save it and make it better. Once it's been improved, the scaffolding can be taken off and the building will be fine on its own. So once the economy in China has improved to a high level, govn't involvement will be less and less and simply to the level of periodical maintenance.

Taking away the govn't oversight now in China will turn the country's economy into something like the Wild Wild West (anything goes with little rules). It's already like that a little bit in China simply because economic laws are not complete and no one enforces it. Think about what would happen if whatever is there is taken away.....

P.S. the filed of macroeconomics basically studies govn't involvement in economy. So simply "less interference" won't cut it...

[Martian]

Wuhan Station with CRH3C in the foreground and CRH2C in the background


Travellers board a high-speed train which heads to Guangzhou in Wuhan, Hubei province

EV WORLD CURRENTS: Wuhan-Guangzhou Express: HSR on a Truly Grand Scale

"Comparing Long-Distance High-Speed Rail Routes
Line---------------------------- Distance Travel Time Avg Speed
China: Wuhan-Guangzhou.. 968 km... 2h57........ 328 km/h
Spain: Cordoba-Barcelona.. 966 km.... 4h42....... 206 km/h
France: Lille-Marseille......... 959 km.... 4h40....... 206 km/h
Italy: Turin-Naples............. 900 km.... 5h45....... 157 km/h
USA: Boston-Newport News 1034 km 12h35......... 82 km/h

Published: 28-Dec-2009"

The article "China's Fast Track to Development" provides important insights into China's motivation for building a nationwide high-speed rail system. For your convenience, I have itemized the main reasons. (See Will Freeman and Arthur Kroeber: China's Fast Track to Development - WSJ.com)

1) "Moving passenger traffic off clogged conventional rail lines will free up room for an explosion of freight traffic."

2) "Increased freight revenue will pay the capital cost of building the new lines."

3) "By reducing the need for airplanes, cars and trucks to carry passengers and freight, the system will yield big savings in energy intensity and carbon emissions."

"Respected transportation economists Richard Gilbert and Anthony Perl reported that electrified high-speed trains traveling on their own right of way are about 9 times more energy-efficient per passenger mile than private automobiles or domestic jet travel (and hence emit about one-ninth as much pollution as air and auto)." See http://www.midwesthsr.org/docs/2009_...s._fiction.pdf

4) "Over the next decade, China's Ministry of Railways expects freight carriage to rise 55%, while passenger-miles will double. More miles of track are not a luxury, but a necessity. In addition to the high-speed lines, the ministry plans to lay another 18,000 kilometers of new conventional freight and passenger track by 2020."

5) "In France, Spain or Japan a mile of high-speed track costs triple a conventional mile. But in China, according to World Bank estimates, the cost premium is as low as 20% to 30%. Cheap labor and locally produced equipment help; so does the decision to build much of the network on viaducts, minimizing land acquisition cost. Finally, building an entire network all at once produces massive economies of scale."

6) "This modest cost premium translates into affordable ticket prices—higher than for conventional rail, but lower than for air travel. The average household income in China's 36 biggest cities is now more than $10,000, so tens of millions of Chinese can easily afford high-speed tickets, especially for business trips."

7) "On several recent trips on the Nanjing-Wuhan, Wuhan-Guangzhou and Guangzhou-Shenzhen lines, we found the trains to be about 90% full. The World Bank reckons that in a few years' time the Beijing-Hong Kong line will carry more than 80 million passengers a year, becoming the world's busiest high-speed passenger rail line."

8) "But the really big gain is that by moving most passenger traffic off existing conventional lines, more space is freed up for cargo. China's businesses—ranging from manufacturers to coal mines—have complained for years about the difficulty of securing space on freight trains, which forces them to move a lot of their cargo on more expensive and less efficient trucks. An increase in rail capacity will enable them to put their freight back on trains, generating huge savings. Ton for ton, freight carried by rail costs nearly 70% less than carriage by truck, uses 77% less energy and produces 91% less carbon dioxide emissions."

9) "For one thing, building the network now, when labor costs are still low, is smarter than waiting a decade or two, when higher wages will push the real cost far higher." In my opinion, China has to build a nationwide high-speed rail network now. I don't think labor construction costs will be affordable in another ten to twenty years. Payment for labor is increasing rapidly in China. By the way, Foxconn (e.g. a Taiwanese company) has 800,000 employees in China.

Foxconn: Production Line Workers In China Get 30% Pay Rise - WSJ.com
"* JUNE 2, 2010, 8:20 P.M. ET
Foxconn: Production Line Workers In China Get 30% Pay Rise"

The Associated Press: Honda says Chinese labor dispute has been settled
"Honda says Chinese labor dispute has been settled

By CARA ANNA (AP) – 9 hours ago

BEIJING — Honda Motor Co. said a labor dispute at a parts plant that crippled the automaker's production in China has been resolved after a wage increase of 24 percent, and the affected assembly plants would be running again Saturday."

Beijing to Raise Minimum Wage in City by 20% - NYTimes.com
"Beijing to Raise Minimum Wage
By REUTERS
Published: June 3, 2010

BEIJING (Reuters) — Beijing will increase the city’s minimum wage by 20 percent, state media reported on Thursday, the latest sign of rising labor costs in the world’s third-largest economy."

[Spartan95]

Nice pictures of gleaming railways and trains!

By the way, in the 2nd pic, the name of the train is "Harmony".

Also, 1 of the reasons for building such a massive rail network is bring development from the coastal regions to the inland regions. With efficient rail, factories located in the land-locked provinces can transport their products out to the coastal ports for export. Similarly, raw materials can be transported efficiently from the ports to the inland factories.

[RedMercury]

There are so many good reasons behind rail development that the naysayers have little to stand on. This is another huge policy success.

[Hendrik_2000]

People obssesed with debt in China is looking for problem at the wrong place. They should worry more about PIIG countries
China Herald: Debt in the West is a problem, not in China - Arthur Kroeber

From dragonomic Arthur Koebler.They guy has been living in China since 80's he know what he talking about
First posted by palembang in CMF

Other economists and analyst, however, say that people who worry about a public debt crisis in China are looking the wrong way. “I’m mystified as to why people are obsessed with this debt issue,” says Arthur Kroeber, managing director of GaveKal Dragonomics, an independent research firm.

Kroeber recalls that between 2000 and 2005, “every investor I talked to” was worried about the prospect of a financial crisis in China. “They never asked me about the risk of a financial crisis in the West, and the reality is that we had one in the US.” Similarly today, he says, people say the public debt issue in China is “terrible”, whereas in fact, it should be the situation in the West they should be worrying about.

“The purpose of debt,” say Kroeber, “is to finance stuff where there is a high upfront cost and the return comes much later.” In China, which has a structural growth rate of 8%, debt has been used to finance infrastructure — which will generate future cash flows. On the other hand, in the US and other Western countries, which have structural growth rates of 2-3% public debt levels are way higher

“And that debt is being used mainly to finance social welfare spending, which produces no cash flow whatsoever.”

UBS China economist Wang Tao reasons that for China “will face a problem in the future” when it has to bring the banks’ bad loans onto its books, but the sustainability of its debt “is not an issue”, given the high savings rates and high growth rates.

In 2008, China’s banking system, having gone through a painful recapitalisation procedure, had a clean sheet. But in the last 18 months, “we’ve seen a huge credit expansion”, some of which, she reckons, will turn out to be bad loans. Over the medium term, the banking system will have to absorb it, but given that the economy will still be growing at 8%, “we don’t think a banking crisis.”

More broadly, says Wang, those who talk of a crashlanding of the Chinese economy are wrong on two counts. For one, they are wrong to extrapolate from last year’s unsustainable levels of credit expansion. “It’s true that if last year’s level of bank lending is kept up, there will be big trouble. But things have already turned around.”

Secondly, adds Wang, it isn’t right to deduce that China has an overinvestment problem by comparing it with Japan or the US. China is not in the same stage of development as the other two countries. “China is going through a rapid phase of industrialistion in the way that Japan did after the Second World War and the US did before the First World War. So if you want to compare, you must compare it those countries in that stage of development.” And the argument that China has a better infrastructure than other developing countries - and argue that any further investment in infrastructure is wasteful - too is fallacious. “It’s like saying someone is too rich because he or she is richer than most other poor people.”

Wang concedes that China does face some risks of a property bubble in the medium term if it does not address the structural drivers that feed local governments’ excessive reliance on land sale revenues. But the risk, she reckons, is not in the short term because credit is more or less under control, and measures to restrict investments in the property sector have already been initiated and are working.

[Martian]

China's high-speed rail lines are able to achieve a world-record average speed of 328 km/h because she developed and "owns 940 high-speed railway patents."

Fast train to open a year ahead of schedule

"Fast train to open a year ahead of schedule
By Xin Dingding (China Daily)
Updated: 2010-03-15 07:19

Beijing: The highly anticipated Beijing-Shanghai high-speed railway will begin operation next year, and is expected to cut travel time to four hours, railway officials said.

The high-speed railway between China's two most important metropolises was scheduled to open in 2012 but will now open one year ahead of time, said Zheng Jian, chief planner with the Ministry of Railways.

Wang Zhiguo, vice-minister of railways, said that it would be a four-hour journey from Beijing to Shanghai, and only three hours from Beijing to Nanjing, capital of East China's Jiangsu province.

At present, it takes about 10 hours to travel from Beijing to Shanghai and Nanjing by train.

A new-generation bullet train that will travel up to 380 kilometers per hour (kph) is now under development for the high-speed rail link.

It will be rigorously tested this year, and engineers want the train to run at a top speed of 420 kph to guarantee a safe operational speed of 380 kph, Huang Qiang, chief researcher with the China Academy of Railway Sciences told the Beijing News.

Vice-Minister Wang Zhiguo said it was expected that high-speed trains would one day take passengers from Beijing to most capital cities within eight hours, except for Haikou, Urumqi, Lhasa and Taipei.

It is expected that an 110,000-km railway network will be completed by 2012, including 13,000 km of high-speed rail, he said.

China already has 6,552 km of rail track in operation - the longest amount of high-speed rail track in the world.

The ministry wants to export China's high-speed railway technology to North America, Europe and Latin America.

Wang said State-owned Chinese companies are already building high-speed lines in Turkey and Venezuela.

Many countries, including the United States, Russia, Brazil and Saudi Arabia, have also expressed interest.

"China is willing to share its mature and advanced technology with other countries to promote development of the world's high-speed railways," he said.

The ministry has signed cooperation memos with California in the United States, as well as Russia and Brazil.

"We are organizing relevant companies to participate in bidding for US high-speed railways and prepare for bidding on a line in Brazil linking Rio de Janeiro with Sao Paulo," the vice-minister said.

The ministry introduced high-speed train technologies from France, Germany and Japan, while at the same time made its own innovations. It now owns 940 patents concerning high-speed railways, the ministry's chief engineer He Huawu said.

At present, at least 10,000 km of high-speed rail line is under construction in China. About 3,676 km of new track for running trains at speeds up to 350 kph have already been laid and put into operation. Another 2,876 km of old tracks have been upgraded to run trains of 200 to 250 kph.

Ultimately, China plans to construct a 120,000-km railway network, including 50,000-km of high-speed rail track, by 2020."


Notice the orange juice and upright cigarette test on China's 350 kph high-speed train.

YouTube- New! Wuhan-Guangzhou Highspeed Railway, China

[Martian]

For those of you that are interested in a pictorial overview of the machines involved in the different phases for the construction of the Guangzhou-Wuhan HSR line, the following video is among the best. Also, it is accompanied by a nice soundtrack.

http://www.youtube.com/watch?v=D3Wnl...eature=related

[Martian]

China rolls out its own 380 – Plane Talking

"China rolls out its own 380
June 2, 2010 – 8:25 am, by Ben Sandilands


The first carriage for the first of 100 China 380A trains (Xinhau)

China has revealed the first of its 380A high speed trains at a ceremony at a factory in Changchun.

It will be followed by another 99 sets in coming months for use on the soon to be completed Beijing-Shanghai high speed rail line which opens in 2011.

This report and others show that the name came not from a play on the Airbus A380 moniker but the fact that the trains have a top operational speed of 380 kmh, exceeding by 30 kmh the top speed of the now, second tier 350A trains that were launched into service in 2008.


Good morning Toulouse, from Changchun (Xinhau)

The great circle distance from Beijing Capital airport (PEK) to Shanghai Pudong (PVG) is 1098 kilometres, and while neither jets nor the soon to begin HS rail link will cover as short a distance in the real world, it is obvious that the train between China’s capital and its largest city will be far preferable in space, comfort, data connectivity, convenience and total trip time for many of those who now fly between them.

Meanwhile, in Australia ……..look on in shame. We can’t even get two of the world’s smallest metropolitan railways to work effectively."

(Note: Thank you to "marchpole" for finding this story.)

[bladerunner]

Meanwhile, in Australia ……..look on in shame. We can’t even get two of the world’s smallest metropolitan railways to work effectively."

(Note: Thank you to "marchpole" for finding this story.)

I liked the "VOLVO:" digger the best: (just Kiddin)

Quite impressive actually,and to think a couple of years ago NZRailways refused to hire a couple of experienced Chinese railroad engineers who emigrated out here, reason.......lack of experience in NZ can you believe it? It made the news because they took a grievence case to a tribunal for prejudice.

[Scratch]

Looks like after a strong first half of 2010, China's export industry might have some trouble in the second half. With the Euro falling because of the public debt problems and austerity messures taken in many countries, the european market might become less profitable for chinese exports for the time being. However, imports would become cheaper.
But of course, China will still be running a solid trade surplus.

http://www.forbes.com/feeds/ap/2010/...gebusinessnews

China exports set to drop as Europe losses mount
Associated Press, 06.12.10, 06:25 AM EDT

BEIJING -- Chinese exports that boomed last month are likely to tumble in the second half of the year due to debt woes in the crucial European market, China's Commerce Ministry said Saturday.

China's exports surged by nearly 50 percent in May, exceeding most analysts' forecasts and producing a monthly trade surplus of $19.5 billion.

Exports to the 27-nation European Union - China's largest trading partner - were up 34.4 percent in the month from a year earlier, while exports to the United States rose 24.8 percent. China's politically sensitive trade surplus with the United States was $16.7 billion.

Those numbers will likely weaken considerably in coming months due to a slow recovery in European countries saddled with large amounts of sovereign debt, along with rising labor costs and higher commodity prices, Commerce Ministry spokesman Yao Jian told reporters at a news conference.

[...]

Exports to Europe, whose debt problems are expected to hurt consumer spending, grew by 34.4 percent from January to May, the ministry said. China's overall exports shot up 48.5 percent in May alone to $131.7 billion, while imports rose 48.3 percent.

[...]

Chinese officials have cited the decline in the euro's value as a major headache for the nation's exporters, making Chinese products more expensive in Europe and contributing to sentiment against allowing the yuan to rise.

How is China doing with it's domestic market anyway? Rather low development priority in terms of staying competitive with it's export oriented industry, or trying to increase public demand for it's own goods, thereby also making it easier for foreing companies to sell things there?

[Hendrik_2000]

Looks like after a strong first half of 2010, China's export industry might have some trouble in the second half. With the Euro falling because of the public debt problems and austerity messures taken in many countries, the european market might become less profitable for chinese exports for the time being. However, imports would become cheaper.
But of course, China will still be running a solid trade surplus.

How is China doing with it's domestic market anyway? Rather low development priority in terms of staying competitive with it's export oriented industry, or trying to increase public demand for it's own goods, thereby also making it easier for foreing companies to sell things there?

I don't believe that even with turndown in Europe, Chinese export will be completely stopped . You see most of Chinese product are daily necessity that even in economic downturn will find demand. The first reaction when Economic hardship hit is too save as much as you can which play to Chinese advantage since their consumer product are mostly priced for lower middle class.

Domestic grow by 17% last year but domestic demand is not going to replace export anytime soon. It will take a long time to be the main driver of economy. Having said that it doesn't mean that domestic demand doesn't grow or play a role in the economy. Not too long ago the dream of every chinese family is to own Bicycle, Sewing maching, Watch. Then in 80's Refrigerator, TV, Washing Machine . Now Home, Car, Travel.

Wages are growing at fast clip of 20% Most of coastal province will soon reached 10.000 Dollar GDP/per capita. I believe Guangdong, Jiangsu,Zhejiang and Beijing already reached that figure It will soon follow by Shandong, Fujian and Inner Mongolia.

but the impulse to save is deeply ingrained in Chinese Psyche. Partly out of necessity poor health care plan and costly education. Also Chinese culture value saving over consumption, Remember that today Chinese is only one generation away out of periodic famine and crop failure

Plan is underway to vastly improve the health plan with universal health care as a goal . But it will take a generation to change the consumption habit of China

[Scratch]

I really did not mean to say chinese export will just stop, just that it probably will be felt. And yes China also exports a lot of basic goods wich people still need even if they have to safe.
However, as I understand China obviously becomes also more adapt at making and selling more technology prone products, like entertaiment stuff, smart phoes etc. I'd assume that those industries feel global economy problems more then others. Or is the export volueme of these industries so small that nobody will really feel it.

[Hendrik_2000]

I really did not mean to say chinese export will just stop, just that it probably will be felt. And yes China also exports a lot of basic goods wich people still need even if they have to safe.
However, as I understand China obviously becomes also more adapt at making and selling more technology prone products, like entertaiment stuff, smart phoes etc. I'd assume that those industries feel global economy problems more then others. Or is the export volueme of these industries so small that nobody will really feel it.

You are right. Contrary to popular believe more than 50% of Chinese export to EU are in fact Electrical machinery and office product.

But since most of them are owned by MNC OR Taiwan and Japanese investor outsourcing product from all over Asia. I don't know what will be the impact on Chinese economy hard to say

[Martian]

You are right. Contrary to popular believe more than 50% of Chinese export to EU are in fact Electrical machinery and office product.

But since most of them are owned by MNC OR Taiwan and Japanese investor outsourcing product from all over Asia. I don't know what will be the impact on Chinese economy hard to say

Greater China's patents play an important role in China's high-tech exports.

For 2009, due to the Great Recession worldwide, China's top two high-tech exports for "Electrical machinery & equipment" and "Power generation equipment" dipped to $537.1 billion US dollars. However, if we add in the $38.9 billion from "Optics and medical equipment" then the overall high-tech exports for 2009 are $576.0 billion U.S. dollars. See "Table 5: China's Top Exports 2009 ($ billion)."

US-China Trade Statistics and China's World Trade Statistics

[Martian]

For 2009, China passed Italy to claim the ninth-highest rank for countries that receive the most patents in the United States.

Patents By Country, State, and Year - All Patent Types (December 2009)

Patents granted by the United States for the year 2009.

1. U.S. 95,037 patents
2. Japan 38,066
(Greater China 10,638)
3. Germany 10,353
4. South Korea 9,566
5. Taiwan 7,781
6. Canada 4,393
7. U.K. 4,011
8. France 3,805
9. China 2,270
10. Italy 1,837
...
India 720
Hong Kong 587 (Patent office counts Hong Kong as a separate entity)
Singapore 493
Russian Federation 204
Brazil 148

For 2009, Greater China's 10,638 combined total patents (i.e. China's 2,270 + Taiwan's 7,781 + Hong Kong's 587) are greater than Germany's 10,353 patents. Greater China would rank third on the U.S. patent list. The patent ranks are important because they help to explain why China is the world's largest exporter and Germany is the world's second-largest exporter. Patents play an important role.

----------
[Note: These are my comments from last year on "Greater China outnumbers German patents."

There are 70,000 Taiwanese companies on the Chinese Mainland. It is my guess that many Chinese exports incorporate not only Chinese patents, but also Taiwanese patents. The Taiwanese were a perennial #4 in U.S. patents received until they were passed by South Korea in 2008.

While the current number of Chinese patents appears to be insufficient to support a large high-tech export base, the combination of Greater China (i.e. Chinese, Taiwanese, and Hong Kong) patents should suffice.

Greater China's 10,370 patents (i.e. China's 1,874 + Taiwan's 7,779 + Hong Kong's 717) are greater than the number of German patents at 10,086.

Taiwan (10/09)
"Significant migration to Taiwan from the Chinese mainland began as early as A.D. 500. ..... There are a number of small political parties, including the Taiwan .... in China, and more than 70000 Taiwan companies have operations there. .... In keeping with our one China policy, the U.S. does not support Taiwan ..."