Super Disco Chino

Winning the battle over the Chinese Yuan? Think again.

noreply@blogger.com (Beibei Yin) — Tue, 21 Sep 2010 17:54:00 +0000

Let’s start with today’s Bloomberg highlights, ‘Yuan Climbs to Strongest Since 1993 as Obama Criticizes China.’The Yuan has been going up against the US dollers on a ninth day amd the Bloomberg writes,

'The yuan has appreciated 1.8 percent since June 19, when the People’s Bank of China said it would pursue a more flexible exchange rate after keeping the currency at about 6.83 per dollar for almost two years'

Presumably, this is a great news for the US politicians fighting hard to rein in China’s ever expanding trade surplus with the US, which is said to damage the latter’s manufacturing and job market.However, on the China’s side, it may well have its plan by leveraging a more flexible exchange rate to help achieve another round of economic restructure.

First of all, expecting a stronger Yuan stops China’s export-driven momentum may have been groundless. From 2005 to date, Yuan has increased its value against US dollars by 20 percent. However, figures from Chinese Ministry of Commerce show that China’s export volume is also growing as fast as 20 percent every year during 2005 to 2008.

And also, a rising Yuan can help the Chinese policy makers handle the pressing inflation issues. From earlier this year, workers in Southern China have been protesting and even killing themselves to demand a higher pay. Keeping Yuan at low while paying workers more in foreign invested companies means to create more local currency in circulation. This adds pressure to expectation therefore economic stability in a macro sense. Hu Xiaolian, the vice president of the People’s Bank of China published an article on the central bank’s website to address this issue. The recent movement of Yuan has reflected that the policy makers are taking their concerns into actions.

But, looking into the micro-level, manufacturing business along the China’s coastline indeed face challenges imposed by competitors offering cheaper and younger labours: Dell is expanding into interior China, Top Form, a bra maker for Calvin Klein has given up new investment in China as they see cost rising in other Chinese cities ‘a matter of time’ so they are to build a factory in South East. On top of these, a stronger Yuan is almost like s a tickling clock over their heads to tell them that ‘time is up’.

Some have already fought back for survival. The International Herald Tribune wrote about undergoing Chinese businessmen model shifts: Chicony, supplier for Xbox and Dell is diversifying its business by opening department stores, Kwonnie, who used to assemble parts for Philips is planning its own line of home appliance. They are creating own brands exploring direct sales channel, moving upwards to more profitable part of the supply chain, and competing with former customers. In another words, a stronger Yuan may in the end transfer the pressure to the companies who have lobbying hard to make the Yuan appreciation happen.

Essentially, China thrives as the world’s most competitive manufacturer while it adds value on the raw materials and half finished products it has imported. So even if the upgrading of business model at the frontline takes efforts and time to happen, a stronger currency at least offers China more overseas cheap buy options. Reducing import cost and getting hold of strategic overseas assets (especially natural resources) can possibly offset the current rising cost in a long run.

The appreciation of Yuan was almost ‘doomed’ to happen as the China-US trade spat gets heated every now and then after Yuan stayed at the same level in the wake of the financial crisis in 2008 after continuously rising from 2005. Hot money that speculating Yuan’s appreciation is one of the major issues the Chinese policy makers have to tackle. Zhou Xiaochuan, governor of the central bank of China has called for diversifying the currency basket by including Euro, Yen and other currencies of major trading partners. Hu Xiaolian, in an interview with a leading Chinese Business weekly in August, implied if the value of Yuan could be adjusted to a basket of currencies rather than Dollar alone, risks of hot money flow will be reduced.

Planet Google, looks lonely without China

noreply@blogger.com (Beibei Yin) — Fri, 29 Jan 2010 15:58:00 +0000

Eric Schmidt, CEO of Google who claimed to have 5000-year patience (as long as the Chinese history) for Google's business in China, would not have foreseen Google.cn may fail to reach its fifth birthday. A blog post declared ending of censorship was widely interpreted to signal a pulling out plan as a non-filtered search engine is not possible for current China. In its own word, Google is said to be irritated by Chinese hacker's attack to get information from Human Rights activists' Gmail accounts. Google claimed to rise its informal motto 'Don't be evil' in defence of human rights and Internet freedom.

Without a deal sealed, both sides across the negotiation table, Google and the Chinese government are already victims under lime light. the Chinese government is again loosing its reputation on human rights issues, but it continues to be the government for over one sixth of world population. However, Google is merely gaining back some points from its heavily criticised decision to cooperate with the Chinese government on censorship. From a business perspective, if Google finally does quit China, its guiding ambition-'organize the world's information' is very likely left as a fantasy by leaving out nearly 400 million Chinese web users out of its reach. Google can argue its Chinese business, which only accounted for around 1 percent of its annual revenue the last year(estimated by analyst at Collins Stewart), is not a big deal. But this might just well footnotes the reason for Google to challenge Beijing.

In his article published in New York Times Magazine in 1970, Milton Friedman wrote 'there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase it profit'. In the four decades since then, corporations have undergone a rapid shift: some, like Starbucks has expanded across national territory and their business become transnational, even global; some, like Nike, has managed to keep the core part of their business (such as brand or R&D) while outsource others to wherever local condition is more favorable; some congregate as a cluster in a certain region, such as the Silicon Valley to gain advantage as a sector.

However, despite changes in the form, purpose of all private business remains the same. Like other Internet companies tried water in China earlier, Google gives up some ethnics for the 'land of promise'-- it agreed to censor search results on its Chinese site to be launched in 2006. When Google hired Kai-fu Lee in 2005 to set up Google.cn, the seven-year old company understood too well the strategic importance of China--population of its web user is soon to exceed U.S.'s to be the world number one, and it has lots low-cost IT talents.

Looking back from four years later, the embarrassing lose-lose situation may possibly mark an end for Google's adventure in China. This reflects weakness of global Internet companies whose expansion has been perceived as unstoppable.

First of all, Google's failure to achieve domination in China is commercial. For foreign companies, China is indeed an attractive market, but unfortunately a tough one. Google has so far failed to achieve what it has compromised for: Baidu, Google's major local rival in China, has more than twice Google’s market share. China, together with four other countries (Russia, Japan, Korea and Czech) still stand in the way for Google to be global dominant search engine. Virtually, none of global Internet companies has really succeeded in China. when Google came to China in 2006, the earlier batch such as Yahoo, AOL, eBay, Amazon and MSN that entered just after new millennium have mostly failed: After suffering from large share losses, they were either sold to local IT companies, or simply shut down. From these examples, Google learnt not to expect a quick return and starting up with localised strategy: It recruits local engineers to develop products for local markets(which might also be extended for global use), and it has 26 small advertising sales units dispersed over 20 major cities across the country. However, result of Google’s business in China did not turn out to be satisfactory: In 2009, sales recorded in China only account tiny bit of its global business and well behind its local rival. There are some reasons can explain Google's disappointing performance from purely commercial considerations. First,Google developed its core search technology based on English, which naturally becomes alien while sorting information in a linguistically and culturally different language. To be accepted by users also turned out to be more difficult for similar reasons. Google had to adopt a Chinese name 'guge' and spent $20mn to buy 'g.cn' with from a local Internet company after it found Chinese do not remember how to spell 'google'. Make everything worse, Google found its local competitors more aggressive than it has estimated. Baidu for instance,funded by foreign venture capitals has abundant amount of cash at its disposal.

Second, as a pioneer to test boundary of state and market in China, Google demonstrates powerlessness of foreign business in front of the Chinese government. If Google were a company provides hardware, it would have been much easier maintaining a solid relation with Beijing, just like Cisco which supplies equipments and technique to implement censorship in China has enjoyed. The problem is, what Google aims to do--organising information is just what the Chinese Communist Party is also keen on. The Golden Shield Project (usually referred as the Great Firewall) was launched the same year Google started and it serves to control information in the Party's interest. Filtering information was justified to protect the youngsters from pornography and a means to maintain social stability and is empowered by judiciary enforcement.

As the first official response to Google's blog post, Jiang Yu, the spokeswoman for Foreign ministry, re-alleged that 'foreign companies are welcomed to do business in China, but they have to obey the Chinese law'. Local government holds an arbitrary position in building its local business environment with local laws, qualification and procedures to get an operating license, tax and policies etc. Google and other information-related companies often find themselves in a particular awkward position in China due to the product they provide. They are strictly required to operate within the 'Chinese law' which often runs in conflict with their interest. International bindings such as WTO is not that helpful in reducing this kind of conflict as Google was not treated unfairly compared with its Chinese competitors, in in terms of level of censorship for instance. Western society has long believed economic liberalization will finally bring in democracy in China. Google has now found this expectation far too naive: to play the game in China, it is often the global companies that have to adapt, not China.

More widely, the breach of Gmail accounts loomed the future of cloud computing. Google as a leading company that advocates cloud computing heralded a one-stop destination for information. Users of Google's Software as a Service soon realize that amount of information they have stored in their Gmail account has made them independent on the service provider and therefore hard to abandon it casually with a click. Here is where security rises as an issue. In the year Google launched of email service in 2006, 60 users found information on their accounts permanently lost due to an internal problem of Google. Google was fortunate that this news was not widely exposed. But this time, although Google is an obvious victim of Chinese cyber attacks, its ability to protect users' privacy is in question. And as a specialist told Financial Times, “It would be a mistake to assume that Google is any more vulnerable than other providers. Any mail server that we have tested is vulnerable to an attack”. It is such a blow to the whole industry!

Without doubts, Google builds an global empire faster and more efficient than anyone could have imagined. A normal Internet user can get almost everything he/she wants only from a wide range of Google products apart from the search engine: browsing Internet with Google chrome, Chatting on Gtalk, Shopping with Google checkout, reading Google Books, getting updated with Google News, and even have a virtual trip on Google earth. With the launch of Google phone, it has pushed everything further: to take all these with you in your pocket! Google is getting closer to its ambition, but it is too optimistic to conclude a borderless winner as its experience in China has just suggested the opposite.

A speech on Internet Freedom given by Hillary Clinton, the U.S. Secretary of State emphasized the fundamental importance of information. This is both good and bad news for Internet companies. For the gloomier side, when national diplomacy and security expands into virtual battlefields, as it already did, global Internet companies will find themselves even more powerless in front of politics.

Planet Google has so far failed to prove an exception.

Google risks business in China by ending censorship

noreply@blogger.com (Beibei Yin) — Wed, 13 Jan 2010 01:59:00 +0000

Hacked Gmail accounts have pushed Google to start talks with Chinese government of an unfiltered search engine

On January12nd, after Google announced to stop censoring search results on Google.cn, its Chinese site launched in January 2006, the site and its office in China are therefore under risks of being shut. According to Google’s blog, this decision was made after investigation of attacks on Google’s infrastructure in mid-December has found out that “a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists.”

The investigation holds evidences to show that “two Gmail accounts appear to have been accessed” by the attackers, but only account information (such as the date the account was created) and subject line, rather than the content of emails have been obtained. Google also found itself not the only victim of this attack, “at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--have been similarly targeted”. Google also discovered that “the accounts of dozens of U.S.-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties” via phishing scams or malware placed on the users' computers.

Based on these findings, Google reviewed its approach to China and decided not to continue censoring searching results on Google.cn, which gained its appearance in China by agreeing to censor some results. Google is well aware of consequences of this decision, and plans to talks with Beijing for the future:

“so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.”

One the same day that Google published this statement, Baidu.com, a Chinese leading search engine which has roughly three times market share than Google.cn(statistics by China Internet Network Information Center ) in China was attacked by Iranian hackers, reported Financial Times. Baidu.com crashed for more than 5hours due to attacks on its domain server in US.

This time, look wider

noreply@blogger.com (Beibei Yin) — Tue, 29 Dec 2009 02:05:00 +0000

With its steady trade surplus and strong foreign investment, China sits on top of world’s largest foreign reserve. As the recent global slowdown has forced many foreign companies to spin off assets, Chinese companies are gaining opportunities to expand further.

China’s economic growth has essentially benefited from a high level of direct foreign investments (around 40 percent of GDP estimated by IMF) which concentrated in manufacturing and later moved into capital and property markets. Since 1990s, Chinese companies and investors were encouraged to “go abroad” for investment and Chinese outward investments spurred especially after its entry to WTO in 2001. In 2009, China’s non-financial outward overseas investment is to reach $42bn while it attracted $77.9 bn in foreign investment in the first 11 months, says a paper by China’s Ministry of Commerce on December 22^nd.

Together with its exports, overseas contracted projects and labor services, Chinese companies are searching for greater presence in international business. Overseas merger and acquisition accounted for 43.5 per cent of Chinese outward foreign investment in 2009.

According to the China’s 11^th Five-Year-Plan running to 2010, its outward overseas investment stock will reach $60bn, and the Chinese government has been active pushing companies to compete internationally with fiscal support, favorable regulation and educational trainings.

In short term, outflow of capital can at least reduce the appreciation pressure for its currency from long-term current account surplus.

Also, by investing in energy and raw material rich regions, such as Latin America and African, China is to secure resources for future developments. Early this year, Chinese Prime Minister Wen Jiabao announced another $10 billion concessional loans to 31 African countries, doubled the size of what Chinese had offered 3 years ago. Africa now accommodates a tenth of China’s total overseas direct investment whose return is to be granted from the region’s development. Some recent big deals have also proved China’s resource hunger was driving the direction of its overseas investment.

At same time, overseas investment contributes to China’s economic restructure and improves Chinese companies’ international competitiveness. From Swiss oil explorer Addax AXC.TO’s buyer Sinopec to Hummer’s new owner Sichuan Tengzhong Heavy Industrial Machinery, Chinese state owned enterprises so far are the leading forces investing overseas. But more private companies such as Lenovo and Huawei are gaining international comparative advantage by acquiring advanced technologies and marketing networks abroad.

However on general, the scale of China’s outward overseas investment is still regional as over half of its oversea investment locates in Asia, predominately in Hong Kong. And comparing with developed countries, China’s capital stock is still very extremely low: By the end of 2002, China’s outward FDI stock only equals to one per cent of Japan’s and half a per cent of US’s.

In addition, as the failure of China’s mining company Northwest Nonferrous in a deal to invest in a Nevada gold mine due t U.S. national security concerns this week just showed, Chinese companies’ over seas ambition is far from free to expand.

10 must-knows before buying a property in China

noreply@blogger.com (Beibei Yin) — Sat, 19 Dec 2009 01:58:00 +0000

[a class exercise]

China’s housing prices has been rising from July 2009 and in November recorded the highest rate in the 16months according to National Bureau of Statistics of China. Although growing rapidly, real estate costs in Beijing and Shanghai are still far cheaper than in Hong Kong or Tokyo.

While investors seem to be worrying of a second pricing dip across debt-drenched mature markets, how about getting into the Chinese market before it gets too late? Here are ten things you must know as an amateur foreign buyer in China.

1 Eligibility

Before everything else, it is good to know if you are able to buy a property in China. Only foreigners have lived in China for at least one year are allowed to purchase a property since July, 2006. This was aimed to curb foreign speculation and did have a great impact on foreign investment in Chinese property market. “We have since then ceased our service in buying property in China.” said one agent from Property Frontier, a London based property agency. But residents of Hong Kong and Taiwan and Chinese overseas are excluded from the regulation.

2 Buying Procedures

Foreigners must apply for permission to buy property, which can be granted through the public security bureau. When signing the contract, a deposit, typically of 30%, is due. This can be refunded if the deal falls through. The official transfer process must go through the Realty Transaction Department and it can take a month or more. The Realty Transaction Department will provide a date for the official Realty Transfer Notice to be given. At the final transaction date, money is exchanged, any legal fees paid, transfer and property taxes are due and the final transfer documents are signed.

3 Ownership

All property in China is under a 'land use right' system, similar to the western leasehold concept. There are three types of lease on land: residential, which is run on a 70-year lease; commercial, which is on a 50-year lease; and industrial, on a 40-year lease. At present, due to the relatively recent nature of this system's creation, what happens at the end of this period is uncertain. The laws of private property protection are quite clearly outlined in constitution.

3 Rental Market Condition

In February 2009, the average rental yield (percentage of rent to purchase price) in major Chinese cities was 4.42% which is relatively low compare to other Asian countries but higher than Hong Kong and Taiwan, according to Global Property Guide research. Government fiscal moves have encouraged individuals to buy, not rent. High-end property rental market was heavily hit during the crisis, as vacancy rates in luxury residential properties in Shanghai rose to 24.2% in Q2 2009, and at 30.2% in Beijing according to Colliers International

5 Tax Policies

After the Central Economic Work Conference finished in early December, the State Council has just re-imposed a sales tax on properties sold within five years after cutting the period to two years in January. This reversal of tax on home sales is said to be “much milder than the market had expected.” Comment Clement Luck, a Shanghai Based analyst at Centaline Property Agency.

6 New Hot Spots

In 2007, 66 out of the 88 land transactions involving foreign investment identified by Knight Frank, an international property agency, were located in second tier cities. The Knight Frank 2008 Report indicates that China’s first tier investment cities are mainly Shanghai, Beijing, Guangzhou and Shenzhen. But with surging land prices and the lack of urban land availability in those cities, property developers have gradually shifted their attention to China’s second tier cities instead.

7 Locals

As many developing countries, laws are different throughout the country, so it is a good idea to have a local real estate agent and/or lawyer to help you through. Zimny, a private investor in Shanghai, said the most important thing when buying in China was to get experience people to help “You can find well-established, well built, well designed properties, and you can find competitive prices. But the buzz words here are: be smart. ”

8 Property Funds

If you do not want to miss out a investment opportunity, but are either not eligible to be a buyer, or feel uncertain to secure a good deal, or simply frustrated by complexity of purchasing in a foreign country. Then property funds majored in Chinese market maybe a better option for you. Property funds invest in Chinese market by both purchasing properties (mainly commercial properties) and holding shares in Chinese developers. However, according to Jiancheng Ye, Chairman of DTZ China investment department, only five foreign funds invested in China this year, less than half of usual number. He also hinted that foreign funds are preparing a transition to reduce operating cost such as tax, and to collect funding in local currency.

9 Currency

The prospects of appreciation of the Chinese Yuan add expectation that property values will eventually get a boost.

10 “Bubble”

After Dubai, fears of bubble in Chinese property market also rise, especially with anticipation that the low interest in U.S. can drive an excessive capital flow into the region. Andy Xie, former Morgan Stanley Chief Aisan economist warned China’s property markets to burst as a bubble when inflation accelerates in 2011 in a interview with Bloomberg, while the Economist argued even if its asset prices slump, the damage will be less grave thanks to the less debt-driving borrowing. It said that only around a quarter of middle-class homeowners have mortgages and the average loan-to-value is less than 50%.

In a recent report, Fitch Ratings predicted that China's property market will remain stable with housing price fluctuation to remain within the narrow range in the next year. Fitch Ratings forecasted that Chinese developers would see moderate growth in sales and profit next year, supported by the country's urbanization process and rise in incomes. Hope 2010 will also bring modest good news for investors.

What does one-child policy mean?

noreply@blogger.com (Beibei Yin) — Thu, 03 Dec 2009 22:14:00 +0000

It first of all means, if you were born after 1978, the year the policy was launched, you probably are the only child in your family just as 100 million others are. It also means, it is illegal to check baby’s gender to prevent abortion for getting a boy from the only chance. It can also mean, family is being atomized and replacing big size traditional ones with generations living together.

Born after 1980s, I grew up with 5 neighbor kids just around my age and their parents were all working in a state-owned factory by which my parents were employed. I used to call my cousins brothers or sisters and hang out with them. I did not even question why I had no siblings as I have taken it for granted: 56 students in my primary school class were all like me, except one boy, and he had a twin brother.

I began to meet friends with siblings after getting into the university in Nanjing, a city that I considered as “north/inland” as I was born just along the southeast coast. Students from the western or rural areas were more likely to have siblings as the policy was much looser in these parts. Years later, my mom explained me that a severe fine(almost equal to her then whole year income) stopped her having an other child, even though the “one child” was encouraged for parents to take and was not yet stated in the law. In turn, she was rewarded a red colored certificate for having only one child and was given compensation till I was fourteen. “It was not only a matter of money, it linked with promotion, benefit and other social pressures.” My mom lived in an age that even her marriage had to be approved by her employer.

What does the one-child policy mean for China? They have a saying at Microsoft about their Asia center “Remember, in China, when you are one in a million, there are 1,300 other people just like you.” Enormous population had put us, one among the millions other baby boomers into intensive competition since the day we were born. But situation could have been worse, the policy was an enormous success in preventing a population explosion in China.

However, for the first generations after the “family planning” policy which encourages late marriage and fewer children (in practice, one), much more challenging tasks are yet to come. According to UN secretariat(http://esa.un.org/unpp/p2k0data.asp), population over 60 will soon exceeds population aged between 15-24 and become twice as big as the latter’s number in two decades’ time. China’s shrinking young population and fast aging population is resulting in a radical demographic transition which brings in problems such as raising health care cost, lacking of young labour forces, high burden for the middle generation, and possible slowing down consumption, etc. It is not unique issue across the globe, but again, China wins (loses?) over scale!

In five years’ time, me and my five other buddies I used to play with will all be at our thirties, with our parents over 60, grandparents over 80s. Normally, our spouses will bring in have a similar pair of parents and even grandparents for us to take care of (it is socially recognized as responsibility in China). So when an article on FT Chinese was discussing loosing the one-child policy to two, the burden becomes inevitably heavier for our generation but good news for my parents: they do not need to fight for having their only grandchild over weekends!

China is not just a bigger Japan, or is it?

noreply@blogger.com (Beibei Yin) — Sat, 07 Nov 2009 22:54:00 +0000

“Where are those elderly people?” Kadir van Lohuizen, a Dutch Photojournalist kept on asking me this question during our visit to a Nokia factory in Dongguan, China. “They are not needed in this city.” I heard myself answered.

In Dongguan, a city that sits at the center of South China manufacturing zone, 90km north of Hong Kong, 75 percent of its 7million residents are migrants from all over the country. They are usually young, and they are diligent: Their spend days and days working in the factories producing for every corner of the globe. They are anonymous, but their names are all mixed into a “made in China” stamp.

Cities like Dongguan and Shenzhen, were forced to be open ports for trading after two opium wars in mid- 19^th century that symbolized the beginning of modern Chinese history. In 1980s, they were ring fenced as “Special Economy Zone” by the Communism Party to test its economic reform and opening policies. In a 150 years time, these old trade ports returned to international traders’ attention as part of the global production chain. Chinese style low tech, labor intensive manufacturing lifted millions of Chinese people out of poverty and also boosted these cities along the coast. There, China not only trades final products and raw materials as 150 years ago, but also participates production on its own or in corporate with any other parts of the world.

Looking back to the China just coming out of a decade long devastating Cultural Revolution in 1976, it literally has nothing to lose. Its GDP per capita was $240 expressed in today’s price, while its neighbor Japan had $10,000 per head in 1970. It soon learnt to adopt the golden pattern that had boosted Japan and Asian Tigers: to develop a manufacturing-dominated, export-driven economy to take advantage of international trade.

Its huge population with very low income and relatively strong industrial base developed under Soviet model sent China onto a track of labor-intensive processing trade. But China also learnt to restructure its export composition in time: It has been shifting many less profitable industries such as textile to its poorer neighbors and managed to approach the end of many supply chains within East Asia. It also manages to expand industries that generate higher profits, such as steel, shipbuilding and machinery that already accounted for over 60 percent of China’s export in 2008. Its service sector also thrived on China’s role as major global suppliers and in turn repositioned China’s niche in the global economy. For example, the Hong Kong based Li& Fung group, developed from a conventional logistics company, now manages a sophisticated sourcing networks based on its expertise in mainland China to find suppliers of materials and manufacturers of products for global companies.

Japan and Korea had achieved similar proportional shift in 80S and late 90s respectively, but both took a longer time. In a highly competitive environment, the faster a national economy finds its niche in the global economy, the earlier and greater it enjoys benefits from its transition. In 2008, China overtakes Japan to be the number two in the world economy in term of GDP.

As trade is one of the biggest driving forces behind China’s two digits GDP growth rates in the past decade, the recent recession starting from world’s biggest economy has inevitably hit China’s export driven economy harshly. But the Chinese has learnt to prepare for rainy days even before it gets cloudy------it has already started diversifying its trade partners. In 2009, China has overtaken US and EU respectively to be Brazil and Africa’s first trade partner. When Chinese top leaders visited 9 countries in Central and Latin America at the beginning of 2009, its exports to this region had already raised ten fold in the last decade. In Brazil for instance, its exports in term of value soared 58 percent from 2007 to 2008 alone.

Besides consistent trade surplus, abundant foreign direct investment is the other main reason for China to sit on top of the world largest foreign reserve. China has long enjoyed a much higher level foreign direct investment poured into its economy than any other developing countries. Foreign investment has concentrated in labor-intensive manufacturing at early stage, and then moved into property and financial sector such as security and credit markets, especially after China’s accession to WTO.

Many indicators have shown that China is approaching where Japan has been: Continued capital and trade surplus, booming stock and property market, and high level of domestic savings. But is China heading for where Japan is now?

It is clear that in the near future, China will still continue its growth powered by its exports, the fact that China has faced the most dumping charges in the successive 12years to 2006 has again questioned market share left for the Chinese. Since its accession to WTO, China has gradually achieved most of its commitments in liberalizing its economy ranging from financial industry to textile sector, from Automobile making to agriculture. But as it is not fully open to the world economy as the currency is not convertible, its financial industry still has many constrains on foreign capitals and it is considered as a non-market economy by WTO, it still finds itself an awkward position in the world economy.

So is warming up relations with new trade partners, especially those with large amount of resources a solution for China? Large purchase of raw commodities from China can make people in African and Latin America wealthier to afford more Chinese goods which are price competitive anyways. It looks like a perfect circle, but not so much if to take two important facts in account: One, resources are not unlimited therefore, potentially expensive, and it can be a matter of security by Russia’s arbitrary cut of gas supplier in the last winter. Two, China may not even profit much from “made in China” products since the supply chain now gets really global. Essentially, China can only profit from the spread of export value minus import value, so if China continue to compete with its lower cost labor and massive production scale instead of searching for solution to increase the value that can be added on its export products, it will be washed out in competition sooner or later. There are always cheaper labors, and after the current generations of Chinese young labors current employed in manufacturing that were born after “one child policy”, number of its young labor is deemed to decrease vastly in the time being.

To pursue a high domestic consumption has been prescribed to China as it potentially has the world’s biggest market. However, it is easier to say than doing. While the massive stimulus plan launched at verge of financial crisis has shown the determination of the Chinese government, Chinese households tend to save than spending as most of them feel uncertain about the future, fear of rising housing prices, unemployment rates and lacking of competent social welfare system. In addition, Chinese companies joined savers' team by making higher profit and paying down debts. American style credit life is deemed as a bad thing from private to public (especially proved by the recent crisis), which then lower possibility to foster a consumption driven economy.

Together with high saving levels, China also faces potential problems caused by its world’s highest investment rate (40 percent according to IMF). High investment level itself is not necessary a problem. But when vast amount of the money gets into fields that create “feeling of wealth” more than driving economic growth in a real term, such as real estate sector and equity market, it is potentially dangerous as it has been proved that it could crash overnight. China is warned to watch out for burst of asset bubbles which have dragged Japan into recession in 1990s from which it is still struggling to get out. But at this stage, neither China’s stock nor property market is dangerously overvalued thanks to the low level of debt driven borrowing in this country.

However, danger still exists if the assets boom actually dries up capitals that otherwise can finance the real economy and therefore limits the efficient capital allocation. There are middle and small Chinese companies, mainly private owned are complaining of its access to the so called “cheap and free capital”, due to high requirements for bank loans and limited exposure to other financing. They are often the ones never get favored from any government’s gigantic stimulus plans. Inequality among individuals will pose threats to social stability, inequality and imbalance in capital allocation and unsustainable growth structure can also cause an economy to crash. Just hope that is not how China differs from Japan.

Do Chinese people shop?

noreply@blogger.com (Beibei Yin) — Fri, 14 Aug 2009 18:08:00 +0000

Yes, they do, and thanks god, they are almost crazy about shopping.

It might sound odd to People living in Nordic Europe where shops shut punctually at 6pm everyday, and generally stay closed during weekends. I asked my Danish roommate when I firstly arrived in Denmark what do people do on weekends if there is no shopping mall open. His answer came to me with his great curiosity: Weekends are for going out to natures, what do you mean by “no shopping mall”? Well, believe me, young Chinese will soon go mad if they find out they can not go anywhere to buy some stuffs after work or on weekends, not because they are too rich to keep money in their pockets or really in need of buying things. Shopping, I just found out after I left China, turns out to be one of Chinese peoples’ main entertainments in spare time and choices there are always more than needs.

Visiting Pingyao, an ancient Chinese city built in 14^th century surrounded by its ancient city walls during a national photographic festival in Sepember,2007, made me think that the central role of commence in Chinese daily life can be dated back to early ages. When small towns in Europe were built around a church as a center in medieval times, Chinese cities thrive on the prosperity of commerce and a shopping street usually served as a spine of a city where all kinds of civic activities took place.

At a first glance of cities in China, you might find everyone is trying to sell something, in different ways, Shops are literally everywhere, so do advertisements. Shopping malls erected in centers of all sizes of cities as landmarks become meeting points for urban inhabitants, walking streets ranging from different lengths and scales are highlighted as major sightseeing places, not mention the massive markets you will not even be able to find way out easily and countless vendor stands appear outside any park or square. These are not only places people trade, but also social: to meet, pastime, and date.

But, things have not always been like that, at least not so three decades ago. In the late 80s when I was a little kid, I remember following my Dad shopping for groceries with “tickets”(click for photos). In the time of planed economy, tickets are used for basic daily necessities such as rice, flour, oil and meat and so on. Payments were assigned to individules according to his/her social class, profession, dependents’ number and so on. I roughly remembered my mom's salary was around 4euros(how crazy!) in cash and some tickets in addtion when I was around 10. So you can imagine how delighted the three of us were when one day my dad was paid with a ticket for a cycle. A cycle was not only quite unaffordable, but almost impossible to to buy with cash in any shops! "Cycle,radio and watch" were regarded as "three main purchase" for each family by then.

In the early 90s, in the little costal town in which my parents and I were living, there once only were stated owned shops in which according to my memory, attendants were always dressed in a white grown and stayed far behind the counter with poker faces. They were always reluctant to move when you asked for a look at something displaced in the counter, not mention answering your request of anything, because any increase of sales will not make any difference on their salaries which are fixed to certain amount once they were hired and they were assured their position were permanent. Things changed much quicker than these shop attendants could ever imagine. In fact, quicker than any ordinary people could ever realize. On one Saturday morning, my mom brought me to watch an opening of the first supermarket in my town. The whole supermarket, and even the whole street were packed with curious and exciting people with little knowledge of this new business mode, “There is no poker faces behind the counters!” “You can choose anything you want and pay at the exits!”

People were celebrating their freedom to consume while being surprised by the emergence of diverse choices of goods. Of course I didn’t realize that my country was undergoing the most important transition in its contemporary history but only quietly listened to my dad exciting stories of his adventures to the south (where the economic reform initially started) as one of the first salesmen in a state owed textile factory. He bought my mom and me gold, dress, silverwares used on planes and all other “exotic” stuffs as I began to dream of the outside world. We also enjoyed walking to a night market not far from our home in the center after dinner when my parents both had time, and I only got to know such kind of night markets appeared all over China since mid-90s were important signs of a prospective market economy.

30 years later than the launch of economic reform, Chinese people's ability and desire of consumption always shocked me while I got really tired of massive shopping mall in which you can spent a whole day, driving to the huge supermarket in the suburban and shopping for a week as once shown in the Hollywood movies, endless advertisements trying to persuade you everywhere even when you are sleeping.

One thing I really appreciated in living in highly developed Western Europe, especially in Amsterdam, is its preservation of small retail shops specified in various aspects (a friend even found a shop only sold tooth brush!) as well as their dignity of keeping shut on Sundays. If Dutch do not have less enthusiasm for shopping than Chinese people, they usually go to street markets or flea markets where individuals’ labor is highly respected, in my eyes.

What is a beauty?

noreply@blogger.com (Beibei Yin) — Thu, 06 Aug 2009 18:03:00 +0000

I can not give a correct answer, because I know it largely depends on the context. For instance, seeing one girl in a commercial feel surprised to see her unevenly tanned shoulders as they were partially covered by her sun-top, if you are expecting her to undo the top and joyfully bask in the sun, you are a complete lay person to Chinese aesthetics. What you will soon find, on different TV channels, girls are applying sun creams marked with “+++” before they get out of their rooms even it is fairly a cloudy day, on the street, there is barely a girl walking without a umbrella in a ordinary summer day although they already had protection with sun creams for faces and for bodies respectively.

Are girls really so eager to be a “white skinned” girl? Partially yes. As an old saying “white skin redeems a hundred bad features.” shows, having a light color is traditionally considered as a necessity to be a beauty. As “your skin looks so pale” is actually a big compliments for girls and it is not hard to understand their scare of being tanned.

But some hostility towards the sun is unconsciously built, mainly thanks to the modern consumerism. Commercials, TV soaps, Sales in the department stores, female magazines keep on giving you a friendly hint that, “No one likes ugly black swans! ” and further social structures, such as family, peers, employers etc help girls to define “happiness” as “being loved by others”. So the simplified logic becomes, being white-skinned guarantees you more happiness and love! How wonderful, so just go to the store and buy according to the prescription: There are thousands of products can help you lighten your skin color.

So, a western girl living in China might find herself very limited choices to be beautiful in her understandings. All the daily products she can find in shops from facial foam to foundation power are all made with the “whiten effect”. That is what I thought immediately after I found out my first purchase in Denmark turned out to be a lotion helps to get sun tanned despite I was expecting something opposite. By the time when summer approaches and girls began to dress themselves in bikinis and have sun bath in parks in Amsterdam, I am already too sophisticated to be surprised: in countries with Atlantic climate, it really feels like a blessing when you see the sun shinning.

However, the closeness with the sun can only be enjoyed in North/Western Europe where it never gets seriously too warm. Although the climate of China varies greatly, the majority of its territory has a boiling summer with a temperature over 30 degrees Celsius. I have the reason to believe, if you were there, you will get fed up soon as well:)

Yes,Get It Started!

noreply@blogger.com (Beibei Yin) — Wed, 05 Aug 2009 16:56:00 +0000

Well, things posted here mainly are ideas have haunted me for a while before I decided to put them out here, and I was hesitating about the language before setting up this blog. Finally, despite my broken English, I decided to write in a language that makes sense to friends around me and whomever is interested in knowing more about China without being scared away by the exotic Chinese characters!

Being away from my own country not only means a six-hour time differences, for which I need to set a special clock with Chinese time on my desk that I will not wake up my grandpa 3am, also it mentally separates me from the natural environment I was born to belong to, therefore I have the chance to observe the differences between my people and the "others”, in a objective(I guess) way.

I have been working as a journalist after my bachelor for three years in China, based in different major cities. The Life Magazine I worked for was quite an idealistic publication, for which I have traveled around this massive country in the aim of documenting its modernization process. This amazing experience taught me a lesson "How little I understand about my own country".

Coming to Europe at the end of the last summer and starting a course with 44 students from 30 countries brought my life and focus of thinking in a ever fresh direction. I do not remember how many times when people confirmed with me that I am from the China, they would raise questions starting with "Why": Why is your population so big? Why is a country with liberal market economy still fine with its non-democratic political system? Why is the housing price so high while your GDP per capita is actually so low? Why does it claim Taiwan part of its territory? Why...is it so different in so many aspects?

Some questions became clichés after all, and I just used some diplomatic answers if I noticed that they were not actually interested in knowing what I thought. But some did inspired me with further research for answers and my deeper interest in finding out why and how is China(not)different from others. I hope this blog can help me to keep these interesting discussions and findings.

When I expressed my doubt that "Why am I recognized as a Chinese, just for I happened to be born there?" People always tried to persuade me with "Come on, you are holding a Chinese passport which is only slightly more useful than an Iranian's" or "Go and look at the mirror and find out yourself! ". I am not satisfied with these responses. Starting this blog is also a means to find out answers to this and therefore a better way to understanding myself.