File Under "No Kidding!"

In a good article explaining why there's so much Chinese investment flowing into housing, I found this funny:

Therefore, housing is special because it is much more concrete than other investments.

I like Yichuan Wang's writing style!

End of Cheap China: Exhibit 1

Elsewhere I've blogged about the end of cheap China. Here's an example of this trend, the first of many I expect:

Etched into the base of Google's new wireless home media player that was introduced on Wednesday is its most intriguing feature. On the underside of the Nexus Q is a simple inscription: “Designed and Manufactured in the U.S.A.”

Stay tuned.

Turning to Imports

The BBC is reporting this as being caused by a surge in energy prices, but my sense is that it's simply part of a greater general trend: after decades of running trade surpluses, China will go on an importing spree that will last many years.

Side note: every time I see a prediction that China's demand for raw materials is about to collapse, I wait for something like this right around the corner:

According to the trade figures released over the weekend, crude oil shipments hit a record-high of 5.95m barrels per day. China's imports of copper and iron ore also rose during the month.

One last point: if China really does become a voracious importer, expect the complaints to be almost as loud as the complaints against China's exporting. It's irrational, but you can expect to hear things like "China is driving up prices for everything." Just the exact mirror complaint of "China is selling everything too cheaply for us to compete," but the complainers will never see their own irony.

China's Next Superfast Train?

Even though this article is really about the slowdown in spending on China's rail upgrade, this is the most interesting part to me:

For those craving even faster speeds, CSR Corp, China’s biggest trainmaker, has unveiled a supertrain (pictured above) said to be inspired by the shape of an ancient Chinese sword. It should slice through the air at 500kph.

C'mon, baby!

Not an Even Bet

Even if I were a betting man, I wouldn't bet against China now:

The importance of exports as a driver of China's growth is overstated. Exports as a percentage of China's 2010 gross domestic product were 27%, down from 35% in 2007. In value-added terms, the real share of exports is even smaller. UBS economist Wang Tao sees a base case in which falling exports shave a percentage point from China's 2012 GDP growth. With GDP growth expected to be around 9% in 2011, all else being equal, that is hardly a disaster.

Real-estate investment is a key driver of China's growth, equal to around 14% of GDP in 2010. Ghost towns of empty houses raise fears that construction might be set to slow sharply. But with millions moving from the countryside to the city each year, and rising wages driving demand for higher-quality accommodations for existing city dwellers, fundamental demand is strong. The government also has policy options: Borrowing restrictions for developers can be loosened and speculators allowed back into the market.

Spot on.

There are way too many empty apartments in the cities now. But there are still hundreds of millions of people who are going to want to fill them in the coming years. If prices fall, it will simply speed up migration to the cities.

It's Time

This WSJ article on the rise of small-scale manufacturing in Africa is good news all around, and will be assigned reading in my International Management class.

Highlights:

Why Africa doesn't make more stuff has been an enduring mystery of the global economy. As wages rose in manufacturing powerhouses such as China, many economists predicted that factories would flock to cheaper pools of labor in Africa, helping to spur the same sort of rapid industrial growth that lifted living standards across Asia.

On the role China may play:

Africa's industry isn't so different from the modest roots of China's own industrial revolution. In the 1980s, Chinese farmers invested in factories to make goods for rural consumers. Multinationals arrived later to fuel an export boom, according to Zhang Chunlin, an economist at the World Bank in Pretoria who specializes on private-sector development.

China's challenge was "to develop in an imperfect environment," says Mr. Zhang, who once worked at a village brick kiln in the northern China. "That is also Africa's challenge."

Tiger vs. Dragon

The Freakonomics blog has an interesting comparison of China and India in terms of both past GDP growth, and current population trends.



But one thing to keep in mind about demographic projections: they seem more inevitable than they are! Often, demographic trends that seem unstoppably moving in one direction take an unexpected turn.

Still, savvy marketers can't afford to ignore demographics, especially the near-term trends.

GDP Equivalents for China's Provinces

My students know I love to drill them on GDP and GDP equivalents. This terrific Economist "country equivalents" map provides a whole new way to grasp relative sizes of economies.


It helps that many of my students come from the countries that this graphic uses to compare to Chinese provinces.

Guangdong's GDP is now larger than that of Illinois!

Tips for Interns

Interning is a big deal here on Chinese university campuses, will most seniors spending a sizable portion of their final year in university working instead of taking classes, at least at the universities I'm most familiar with.

These tips for law student interns, in my view, are worthy of consideration by students interning for all kinds of organizations.

If You Say Something Often Enough, That Does Not Make It True

Enough already with the "Chinese term for crisis comprises of two words: danger and opportunity."
I recommend the New York Times to my students but stuff like this makes me wonder, "Where have the editors gone?" All those layers of fact-checkers...

Saying the "Chinese term for crisis comprises of two words: danger and opportunity" is a like saying "the English term understand is comprised of two words, under and stand, meaning if you understand something, you have something to stand on solidly, but there are still new things to learn above you." Or some other silliness.

The Chinese term for crisis truly is composed of two characters. One is associated with the idea of danger, among other things. The other is associated with the idea of chance or crucial point. Not opportunity per se.

It just so happens that since the idea of "crisis" and "opportunity" both share in the idea of "crucial point," both two-character words share one character. That's it. No deep meaning here.

Wanna play this game with other Chinese characters?

• "The Chinese term for common cold comprises of two words: feel and careless. See the ancient wisdom! You can catch a cold from being careless!"
• "The Chinese term for economy comprises of two words: to manage and to cross a river. See the ancient wisdom! You can't grow an economy without innovation!"
• "The Chinese term for invest comprises of two words: to throw and expenses. See the ancient wisdom! The fees of a good mutual fund manager are justified!"

Worst of all, the author of this article is a professor at MIT. Of international management. Ugh.

Why Oil Prices Fell

Pretend it's a multiple choice question. Oil prices fell yesterday to about $95/barrel. What caused the decline?

a) A slowdown in manufacturing growth in China.
b) Concerns about euro debt.
c) Plans for an interest rate hike in China.
d) Could be all of the above, or none of the above.

My money's on D. Coming up with plausible reasons for a price change, and actually being able to prove the reason for the price change, are two so very different things.

World Hunger, Income and Substitution Effects

Don't miss one of the best articles I've seen in a long time on hunger and development. Governments simply can't ignore economics when designing policy. A good starting principle: people respond to incentives. And not always the way governments imagine they will.

In one study conducted in two regions of China, researchers offered randomly selected poor households a large subsidy on the price of the basic staple (wheat noodles in one region, rice in the other). We usually expect that when the price of something goes down, people buy more of it. The opposite happened. Households that received subsidies for rice or wheat consumed less of those two foods and ate more shrimp and meat, even though their staples now cost less. Overall, the caloric intake of those who received the subsidy did not increase (and may even have decreased), despite the fact that their purchasing power had increased. Nor did the nutritional content improve in any other sense. The likely reason is that because the rice and wheat noodles were cheap but not particularly tasty, feeling richer might actually have made them consume less of those staples. This reasoning suggests that at least among these very poor urban households, getting more calories was not a priority: Getting better-tasting ones was.

Business Education in China

Good news for those of us who teach business-related subjects in China: Bob Ludwig says business education is on the rise here, with GMAT volume rocketing.