Chinese consumerism

Lou, who is now in hospital, has become iconic in her village and people have said she puts the government and other officials to shame

For the significance of this exemplary woman…scroll to the end.

China Needs Its Own Dream

“On Nov. 8, China is set to hold the 18th National Congress of the Communist Party. We already know who will be the next party leader: Vice President Xi Jinping. What we don’t know is what matters: Does Xi have a “Chinese Dream” that is different from the “American Dream?” Because if Xi’s dream for China’s emerging middle class — 300 million people expected to grow to 800 million by 2025  — is just like the American Dream (a big car, a big house and Big Macs for all) then we need another planet.”

Elite and Deft, Xi Aimed High Early in China

Who’s who: main men at the top of the party

Xi Jinping, 59
Seen as a party “princeling” (a privileged child of a powerful Communist Party figure) the man due to be sworn in as China’s next President grew up in an era of reform and of more openness, and is believed to represent a new generation for the party.

Ling Jihua, 55
Considered to be one of Mr Hu’s closest aides, his effective demotion to the Central Committee’s United Front Work Department (Mr Ling’s new, less-powerful office) is a blow to Mr Hu’s legacy. Li Zhanshu, an ally of the soon-to-be sworn in Xi Jinping, takes Mr Ling’s place.

Li Zhanshu, 62
Mr Li’s appointment as head of the party’s general office may be a boon to Mr Xi, but it could also prove to be controversial. When The South China Morning Post reported that Mr Li’s son was killed in a car crash while driving a Ferrari in March, a wave of public criticism centred on the car – which many said showed he led the opulent lifestyle of a princeling.

Wang Yang, 57
The party chief for China’s most populous province, Guangdong, has been hailed as a reformist whose relatively liberal rhetoric has made waves in the party. He is tipped for a key role in the new leadership.

Li Keqiang, 57
China’s Vice Premier is one of President Hu Jintao’s closest allies. It is thought Mr Hu is angling for Mr Li to be made a vice chairman of the party’s military commission at next month’s congress.

Panetta meets with China’s elusive leader-in-waiting

LARRY DOWNING/REUTERS – U.S. Secretary of Defense Leon Panetta shakes hands with China’s Vice President Xi Jinping before meeting at the Great Hall of the People in Beijing on Wednesday.

By Craig Whitlock, Published: September 18

BEIJING — China’s anointed leader, Xi Jinping, reemerged from the shadows Wednesday as he met with U.S. Defense Secretary Leon E. Panetta and smiled for the cameras, quelling speculation about his health and political status.

Xi is widely expected to be declared China’s new president next month, part of a once-in-a-decade revamping of the senior Communist Party leadership. But his unexplained cancellation of meetings with foreign dignitaries and disappearance from public view in recent weeks had triggered a frenzy of rumor and gossip.

The 59-year-old Xi offered a firm, prolonged handshake to Panetta in front of Western and Chinese journalists assembled inside an ornate reception room in the Great Hall of the People.The two leaders exchanged pleasantries for about five minutes before the media was ushered away.

“It is a great pleasure for me to meet you again, Secretary Panetta, and to welcome you to China,” Xi said in Chinese, appearing comfortable and at ease as he paced across the room in a dark suit and a light-blue tie.

“It’s an honor to have the opportunity to visit with you here,” Panetta, 74, replied with a broad smile. “I appreciate all of your support in encouraging better military-to-military relations between our two countries.”

Xi was supposed to meet with Secretary of State Hillary Rodham Clinton earlier this month but was a no-show; he also canceled meetings with three other foreign leaders. The Chinese government offered no official explanation for his withdrawal from the limelight.

U.S. diplomats said they were told privately by Chinese officials that Xi was hampered by a bad back.
Other rumors included speculation that Xi had suffered a heart attack, hurt himself playing sports or been the target of an assassination attempt.

On Saturday, Xi suddenly reappeared in public when he toured a Chinese university campus, looking very much alive and light on his feet.The visit was brief, however, and the state-run media distributed only two photographs of the event.

His meeting with Panetta was the first time in nearly three weeks that he had showed up for a scheduled, public event with journalists present.

Panetta is in the midst of a three-day visit to China, the first since he became defense secretary in July 2011.In February, Panetta hosted Xi on a visit to the Pentagon, replete with an honor guard. So failing to return the favor with a meeting in Beijing would have only fueled more questions about Xi’s condition.

The son of a revolutionary leader, Xi is being groomed to take over as China’s president from Hu Jintao as part of a broader reorganization of the Politburo Standing Committee, which runs the country.

Although China has sought to project an image of stability and order during the leadership transition, that script has been undermined by intra-party feuding, including a murder-and-corruption scandal involving another Politburo member, Bo Xilai.

Images that appear to show China’s prototype stealth fighter jet, unveiled during U.S. Secretary of Defense Robert Gates’ January 2011 visit to Beijing, during a ‘taxi test’ at a facility in western China.

“…As if U.S. Secretary of Defense Leon Panetta didn’t have enough to contend with on his current China visit, photos leaked online on Sunday suggest Shenyang Aircraft Corporation (SAC) is making substantial progress on a stealth aircraft prototype, which Chinese netizens and foreign analysts have variously dubbed the “,” “,” and “F60”—a possible future export variant. SAC itself seems to have painted a “31001” designation on the aircraft. (For purposes of consistency, we will henceforth refer to the aircraft as the “.”) The timing of the photo release echoes the events surrounding former Secretary of Defense Robert Gates’ January 2011 visit to China, when the PLA conducted a surprise test flight of (CAC)’s J-20 late-generation strike fighter prototype.”

Xi Jinping ‘under huge pressure’ from inside the Communist party
Xi Jinping, China’s president-in-waiting, who has not been seen in public for two weeks, was under intense pressure from within the Communist party before he disappeared, the Daily Telegraph has been told.

Some old Maoists feel like dissidents in modern China

ByKathrin Hille, Published: September 14

SHAOSHAN, China– At a country inn in southern China, several dozen Maoists met for a Communist study session one evening in early September. But their gathering ended abruptly as one participant rushed in, saying, “There are dogs outside!”

The police had arrived on the scene to monitor the 82 followers of Mao Zedong, the man who led China’s Communist revolution in 1949.

Most of the Maoists were men in their 60s filled with nostalgia for the Cultural Revolution – a turbulent period they lived through along with the next generation of Chinese leaders who will be named next month.

But 36 years after Mao’s death, his loyal followers often feel more like dissidents.

Today’s leaders are capitalist-roaders and revisionists,” says one retired worker surnamed Zhou, resurrecting terms used during the Cultural Revolution, which wreaked havoc on China from 1966 until Mao’s death in 1976.

Zhou and the group were visiting Shaoshan, Mao’s birthplace in Hunan province, to commemorate the anniversary of the death of the former leader.

“They call it socialism, but Deng Xiaoping, [the architect of China’s market reforms], has created a system that combines the worst of all worlds: hyper-capitalism, corruption and fascism,” says Zhou.

While the Communist party has refrained from carrying out a complete reappraisal of Mao’s rule, which claimed millions of victims in a series of murderous campaigns, he is no longer held up as its principal idol and criticism of him is widespread.

For more than a decade, China’s leaders have faced censure from the left as market reforms have seen the country’s income gap widen, corruption soar and peasants fall far behind urban residents in access to social security.

When they came to power 10 years ago, Hu Jintao, president, and Wen Jiabao, premier, appeared to respond to concerns by introducing health-care reform plans and tax cuts. But leftwing critics say those efforts have stalled.

“In their first [five-year] term, Hu and Wen still achieved some things. But in their second term, many reforms couldn’t be continued so they stopped again,” says Wang Hui, a professor at Tsinghua University whom many see as the academic leader of China’s “new left.” “As a result, both the left and the right are dissatisfied. In such a situation . . . a radicalisation of the left is unavoidable.”

In 2008, a group of Maoists founded the Chinese Communist party Maoism, which branded the ruling Communist party “revisionist traitors.” A year later their leaders were arrested and sentenced to 10 years in prison.

Many on the left saw a leader in Bo Xilai, the charismatic politician who took over as Communist party secretary of Chongqing in 2005. After Bo launched policies that resonated with leftist ideals, including a low-income housing programme and a campaign that sought to revive Maoist traditions such as singing “red” songs and sending cadres to learn from peasants, they rallied around him – only to see him purged in March this year.

The removal of Bo has left the Maoist camp disenfranchised and angry, and fed rumors over the past week that allies of Bo might have attacked Xi Jinping, China’s president in waiting who has disappeared from public view.

“Bo Xilai led a political struggle in the party, but the centre has hit back with a political counter-struggle against him,” says Fan Jinggang, manager of Utopia, a leftwing bookstore in Beijing, which organised the Shaoshan trip. After the purge of Bo, the government closed its Web site, which was one of the main platforms for China’s left.

On last week’s trip, Mao’s followers took refuge in nostalgia. “Back then, when we were red guards, we would spend our days like this, roaming the country and singing,” enthuses Qiu Shike, one of the Maoist camp’s main theoreticians, still breathless from trumpeting a red song on the tour bus. On the drive from the provincial capital Changsha to Shaoshan, he and his friends repeatedly broke into song with renditions of “The red army longs for Mao Zedong.”

While very few Chinese share these fervent beliefs, many share the Maoists’ grievances about their country’s social imbalances and corruption.

As the group joined the long queue of visitors outside Mao’s ancestral home, clad in white T-shirts bearing the likeness of Mao on the front and the words “the people yearn for Mao Zedong” on the back, they stood out among the crowd of mostly young tourists.

The other visitors were taken aback when the Maoists shouted “Down with the fake Communist party!” But when they switched to “Down with the corrupt officials!” there was applause and cheers and some of the tourists even joined in.

“I may not be so crazy about Mao Zedong as some of these old guys, but I know that many things were better under him,” says Wang Shuai, 31, a teacher who joined the Utopia trip.

Many Maoists say that China needs more than popular discontent to engineer change, but regret that there is nobody to lead their cause nationally.

“We need another revolution. You can’t bring about change without some violence,” says Mao Jianhui, a Maoist who lost his Communist party membership after siding with Tiananmen student protesters in 1989. “Clearly the popular sentiment is there and the people are ready. But someone needs to organise and lead them and there is nobody right now.”

U.S. policy on China sees little progress
1:27 AM, Sep 7, 2012

American “free trade” with China entails the export of manufacturing jobs, currency manipulation, theft of intellectual property, and the import of American know-how. Free trade is symmetrical in theory and assymetrical in practice: Chinese mercantilism. See the result.

Multi-millionaire builds exact replica of famous French chateau for $50million… in Beijing

PUBLISHED: 16:07 EST, 12 June 2012 | UPDATED: 01:45 EST, 13 June 2012

Mirror image: The Zhang Laffitte Chateau hotel on the outskirts of Beijing is an exact replica of France’s historic Chateau Maison-Laffitte

The stunning chateau, situated on land that used to be covered with wheat fields, is surrounded by a moat

The eye is in the detail: Not a single detail has been missed after designers used 10,000 photos to make sure the Beijing chateau was identical to the original

Lighting up the night: Even staff and guards at the Zhang Laffitte wear traditional French uniforms in keeping with the building

Replica: Thames Town, located 19 miles from Shanghai in China, has been built to look like an English town

Stratford near Shanghai: A father carries his child through the rain in front of a Tudor-style housing development

Snap: The town has a Gothic church which has become a popular location for photography on wedding days

The country where bling is king: As the rest of the world scrimps and saves, China draws up a luxury shopping list

PUBLISHED: 14:46 EST, 10 June 2012 | UPDATED: 07:00 EST, 13 June 2012

Luxury sports cars, fine art and foreign antiques. Thousands of shoppers flocked to Beijing this weekend to feast their eyes and empty their wallets at a luxury fair.

The is a celebration of conspicuous consumption and demonstrates the global economic crisis has yet to dent China’s appetite for all things bling.

Even at a time when its own uncrushable economy is showing signs of slowing, the Chinese are continuing to spend their hard earned money on foreign-made luxury items.

When the global recession peaked in 2009, retail sales rose by 16 per cent and experts predict that sales of luxury products in 2015 will reach £17 billion.

Visitors to the luxury fair browse a limited edition customised Morgan Aero Coupe, with a £325,000 price tag

Buying foreign: Commentators are concerned China has no luxury brands of its own

Visitors pose for photos beside a special edition Morgan Plus 8 with a £275,000 price tag

That figure would amount to more than a fifth of the global luxury market and make China the world’s biggest luxury consumer.

Commentators are concerned by the lack of homegrown luxury brands at the Luxury China fair, which opened in Beijing on Friday.

There were British Morgan cars and Indian-owned Range Rovers, but few Chinese products on offer.

Xiong Xunlin, deputy secretary-general of the China Chamber of International Commerce told China Daily: ‘China has basically no top-class luxury brands, which is a regrettable situation.’

And recent research carried out revealed Chinese consumers don’t believe the country can produce its own luxury brands.

Still spending: Even at the peak of the global economic crisis, sales of luxury products rose sharply

Despite the lack of luxury brands, China’s exports continue to thrive – the government revealing a 15 per cent leap in May compared to the same month last year.

But analysts are forecasting the world’s second largest economy will grow by its slowest rate in a decade, raising the risk of job losses and unrest.

The government announced Saturday that in May, growth in factory output edged up to 9.6 percent from April’s 9.3 percent – the lowest rate since the 2008 crisis – but was well below last year’s levels.

Beijing cut interest rates last week for the first time in nearly four years in a new effort to buoy growth that fell to a nearly three-year low of 8.1 percent in the first quarter and is forecast to fall further.

Chinese leaders spent two years tightening lending and investment curbs to cool an overheated economy and inflation before the unexpectedly sharp drop in global demand last year prompted them to reverse course.

The government is now scrambling to reverse the slowdown and help struggling exporters by boosting lending, investment and spending on public works.

Economic woes in Europe continue to cast a shadow. Exports in the first five months of the year to the 27-nation European Union, China’s biggest trading partner, are down 0.8 percent compared to the same period last year. That includes a drop of 25.1 percent in exports to debt-plagued Italy.

That has been offset by surprisingly strong exports to the United States, which are up 14.4 percent in the first five months compared to the same period a year ago.

China’s rapid industrialization fuels more public protests

By Calum MacLeod, USA TODAY

A protester stands in front of lines of riot police officers Saturday in Qidong, China. By Eugene Hoshiko, AP

BEIJING – Thousands of residents poured into the streets this weekend to oppose an industrial waste pipeline project in the east China city of Qidong. Some overturned police cars; others occupied and ransacked city hall.

They won their fight.

The pipeline that residents fear will pollute their water will not be built, the government promised on the Qidong police micro-blog and the website of Nantong city, which oversees Qidong.
This apparent victory for residents follows another one this month when protesters in the southwest city of Shifang, in Sichuan province, forced officials to scrap a planned copper refinery. A large demonstration halted a petrochemicals plant in Dalian, in eastern China, last year.

Environmental experts cheer the growing rights awareness among China’s citizens that forced the Qidong decision, but they caution that China will face many more such protests unless the government overhauls its opaque decision-making process and allows the public to participate.
As China keeps up its frenzied pace of industrialization and urbanization, more protests are inevitable as China continues to “deny the communities the right to be informed and participate,” said Ma Jun of the Institute for Public and Environmental Affairs.

“With rising public awareness, people will take action to defend their own rights,” Ma said. “But we can’t resolve them all through street action, we can’t afford the social cost.”

After startling scenes of protest Saturday, order was restored Sunday, said Pan Songhua, who runs a small company in Qidong. Some social media sites reported a heavy security presence.

The pipeline, intended to discharge wastewater from a Japanese-owned paper mill, also stirred local anti-Japanese feelings, Pan said.

Both the Qidong and Shifang demonstrations “reflect what happens when there are no effective formal channels for public input into environmental decision making,” said Alex Wang, a Chinese environmental law expert at the University of California-Berkeley School of Law.

After years of rapid economic growth, “China’s environment has reached the most dangerous stage, affecting the health of many ordinary people,” said Wang Yongchen, co-founder of non-profit Green Earth Volunteers. “We will keep having incidents like these” until the government gives ordinary people a voice in decision-making, she said.

“I worry there will be more, and more violent, protests,” said Beijing lawyer Xia Jun, who specializes in environmental litigation. “Many people will study Qidong and Shifang and copy them.”

Protest may be the only recourse. “Even if a judge feels he wants to help the people, many local governments do not allow courts to accept environmental lawsuits” against government-approved projects, Xia said.

Berkeley’s Wang said he hopes Qidong is “a wake-up call” for leaders: “If they don’t create genuine channels for engaging with the public before polluting projects are approved, they will inevitably have to deal with the much uglier aftermath when protests erupt.”

Contributing: Sunny Yang

The day people power took on the might of China – and won
Environmental protest forces U-turn on plan to build a factory despite police crackdown–and-won-7906813.html

Although the Chinese economy continues to slow, the ranks of the ultra-rich continue to swell. One out of every 1,300 people in China has an annual income of one million yuan (£100,000) or more, says the latest edition of the Hurun Report on wealth in China, while those with more than 10 million yuan (£1m) broke through the one million mark for the first time, up 6.3 per cent on 2011.

June 5, 2012, 7:28 PM HKT
Luxury Spending Tops $1.4 Trillion

Anthony DeMarco, Contributor

LIFESTYLE 10/14/2011 @ 10:46AM |4,098 views

China Leads World in Luxury Spending

Affluent consumers in the U.S. and much of the world are pulling back on their spending and attitude toward luxury. However, in China, affluent consumers are choosing luxury in every aspect of the lives, according to a seven-country survey of households earning at least $150,000.

About 57 percent of wealthy Chinese shoppers say that the economic environment has prompted them to spend more on luxury in the past year, and 50 percent plan to boost spending in the next 12 months, according to the survey by the Luxury Institute, a New York-based consulting firm. Restraint is more evident in the U.S., where 10 percent of the wealthy stepped up luxury spending in the past year and 6 percent plan to spend more in the next 12 months. U.S. consumers are twice as likely as those in China (32% vs. 16%) to have trimmed luxury spending last year.

Meanwhile, in Europe the currency crisis did not stop 14 percent of wealthy shoppers in France and 17 percent of those in Italy from boosting luxury spending this year, according to the survey, which represents the top 10 percent in household income. However, 38 percent of high-income shoppers in both countries plan to cut back in the coming year.

In Japan, the March earthquake and tsunami dampened enthusiasm for luxury shopping, with 7 percent of wealthy Japanese consumers reporting higher levels of spending and 34 percent cutting back.

The most widespread retrenchment comes in the U.K., where 38 percent of wealthy shoppers have pared back luxury spending, and 41 percent plan reductions in coming months. Germany shows more stability compared to other rich nations: Only 17 percent of wealthy German consumers say that they are spending less on luxury now and 29 percent plan to trim luxuries in the coming year.

Across all seven markets, luxury travel is the category in which most wealthy consumers anticipate stepping up spending, with China far and away showing the strongest appetite, according to the survey.

In China, 58 percent of the wealthy plan to spend more on leisure travel, followed by 28 percent in Italy and 22 percent in Germany who say the same. A total of 16 percent of wealthy consumers in the U.K., and 18 percent in the U.S., Japan, France and Italy, plan to spend more on travel.

Spending plans across the board in each of the 26 luxury categories were substantially higher in China than in Europe and the U.S., with some of the biggest disparities showing in apparel, watches, jewelry and gifts where Chinese consumers were six to seven times more likely to boost spending, according to the survey. Also strong in China are luxury auto sales, with 43 percent of the wealthy planning to spend more on cars, compared to 11 percent in the U.S., U.K. and Japan.

Attitudes towards luxury are far more positive in China than they are in other rich nations, with 78 percent of those surveyed saying that luxury goods and services are more important in today’s economy. The reverse is true in the U.S. where 80 percent of wealthy shoppers say that luxury has become less important.

More than 75 percent of Chinese say that luxury expenditures are prudent purchases, while 78 percent of wealthy consumers in the U.S., U.K., and Germany find them to be an extravagance. Similarly, 78 percent of China’s wealthy shoppers say that luxury goods and services are an important part of their lifestyle in today’s economy, compared to 25 percent in U.S. and Germany and 20 percent in France who agree that luxury remains central in their lives.

Wealthy Chinese consumers are also highly inclined to place a premium on exclusivity and quality, and discounting turns them off. More than half of wealthy Chinese and 49 percent of Japanese say that brands that discount their merchandise are not truly luxury brands. In the U.S. and Germany, one-third of wealthy consumers share the same dim view of discounting, as do 40 percent of wealthy shoppers in the U.K, Italy and France. Despite the dour attitude towards discounting, 56 percent of wealthy Chinese say that discounting has increased their overall spending on luxury and 50 percent plan to spend more on discounted luxury items in the coming months.

China’s capital flight: to US real estate

To the rising flow of anecdotal evidence suggesting China’s rich are taking their money out of the country, add this: China is now one of the fastest-growing sources of international buyers for US real estate.

According to a report published by the National Association of Realtors this week, buyers from China and Hong Kong made up the second largest group of foreign buyers of homes in the US in the 12 months to March – behind only Canadians – accounting for $9bn of sales.

That’s a 23 per cent increase on the $7.3bn of sales they notched up in the previous 12 months and a whopping 88 per cent increase from $4.8bn of sales in 2010.

Chinese tourists boost Taiwan’s economy

TAIPEI, Taiwan — The sign inside the mausoleum of Chiang Kai-Shek tells visitors to “please bow or show your respects” to the general who fought a bloody civil war against Mao Zedong and then fled China for Taiwan, where he spent years plotting to retake the mainland from its Communist rulers.

Now, busloads of Chinese tourists come every week to visit Chiang’s tomb, nestled between two red and blue Taiwanese flags in the small town of Daxi, an hour’s drive south of Taipei.

Just a few years ago, this wave of mainland tourists visiting Taiwan would have been impossible. China strictly limited its citizens’ visits to the nearby democracy, which Beijing considers a renegade province.

Chinese tourists trailing behind a baton-wielding guide through museums and luxury shopping outlets are a common sight in most of the developed world, but in Taiwan this is still very new. The influx of tourists from the mainland is having a real economic impact — and there is hope that it will begin to soften the relationship between the two historical antagonists.

“In the past, people in China took Taiwanese as radicals,” said one young tourist visiting from northern China, “but for the young generation, it’s different. We have various channels to get to know about Taiwan, like YouTube, movies and TV shows from Taiwan. We can watch them on the Internet.”

Chinese to become biggest spenders as record numbers head overseas
Expanding middle class fuels boom, with growing demand for scenery and culture on itineraries as well as shops

Bags of toys stored at a shop in a wholesale market in Guangzhou, a city in southeast China.

China Confronts Mounting Piles of Unsold Goods

Published: August 23, 2012

GUANGZHOU, China — After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.

But the main nongovernment survey of manufacturers in China showed on Thursday that inventories of finished goods rose much faster in August than in any month since the survey began in April 2004. The previous record for rising inventories, according to the HSBC/Markit survey, had been set in June. May and July also showed increases.

“Across the manufacturing industries we look at, people were expecting more sales over the summer, and it just didn’t happen,” said Anne Stevenson-Yang, the research director for J Capital Research, an economic analysis firm in Hong Kong. With inventories extremely high and factories now cutting production, she added, “Things are kind of crawling to a halt.”

Problems in China give some economists nightmares in which, in the worst case, the United States and much of the world slip back into recession as the Chinese economy sputters, the European currency zone collapses and political gridlock paralyzes the United States.

China is the world’s second-largest economy and has been the largest engine of economic growth since the global financial crisis began in 2008. Economic weakness means that China is likely to buy fewer goods and services from abroad when the sovereign debt crisis in Europe is already hurting demand, raising the prospect of a global glut of goods and falling prices and weak production around the world.

Corporate hiring has slowed, and jobs are becoming less plentiful. Chinese exports, a mainstay of the economy for the last three decades, have almost stopped growing. Imports have also stalled, particularly for raw materials like iron ore for steel making, as industrialists have lost confidence that they will be able to sell if they keep factories running. Real estate prices have slid, although there have been hints that they might have bottomed out in July, and money has been leaving the country through legal and illegal channels.

Interviews with business owners and managers across a wide range of Chinese industries presented a picture of mounting stockpiles of unsold goods.

Business owners who manufacture or distribute products as varied as dehumidifiers, plastic tubing for ventilation systems, solar panels, bedsheets and steel beams for false ceilings said that sales had fallen over the last year and showed little sign of recovering.

“Sales are down 50 percent from last year, and inventory is piled high,” said To Liangjian, the owner of a wholesale company distributing picture frames and cups, as he paused while playing online poker in his deserted storefront here in southeastern China.

Wu Weiqing, the manager of a faucet and sink wholesaler, said that his sales dropped 30 percent in the last year and he has piled up extra merchandise. Yet the factory supplying him is still cranking out shiny kitchen fixtures at a fast pace.

“My supplier’s inventory is huge because he cannot cut production — he doesn’t want to miss out on sales when the demand comes back,” he said.

Part of the issue is that the Chinese government’s leaders have decided to put quality-of-life concerns ahead of maximizing economic growth when it comes to two of the country’s largest industries: housing and autos.

Premier Wen Jiabao has imposed a strict ban on purchases of second and subsequent homes, in the hope that discouraging real estate speculation will improve the affordability of homes. The ban has resulted in a steep decline in residential real estate prices, a sharp fall in housing construction and widespread job losses among construction workers.

At the same time, the municipal government in Guangzhou, one of China’s largest cities, has sharply reduced this summer the number of new car registrations it allows so as to reduce traffic congestion and air pollution.

Municipal officials from all over China have been flocking to Guangzhou to ask for details. Xi’an, the metropolis of northwestern China, has already announced this month that it will limit car registrations, although it has not settled on the details.

The Chinese auto industry has grown tenfold in the last decade to become the world’s largest, looking like a formidable challenger to Detroit. But now, the Chinese industry is starting to look more like Detroit in its dark days in the 1980s.

Inventories of unsold cars are soaring at dealerships across the nation, and the Chinese industry’s problems show every sign of growing worse, not better. So many auto factories have opened in China in the last two years that the industry is operating at only about 65 percent of capacity — far below the 80 percent usually needed for profitability.

Yet so many new factories are being built that, according to the Chinese government’s National Development and Reform Commission, the country’s auto manufacturing capacity is on track to increase again in the next three years by an amount equal to all the auto factories in Japan, or nearly all the auto factories in the United States.

“I worry that we’re going down the same road the U.S. went down, and it takes quite some time to fix that,” said Geoff Broderick, the general manager of Asian operations at J. D. Power & Associates, the global consulting firm.

Automakers in China have reported that the number of cars they sold at wholesale to dealers rose by nearly 600,000 units, or 9 percent, in the first half of this year compared to the same period last year.

Yet dealerships’ inventories of new cars rose 900,000 units, to 2.2 million, from the end of December to the end of June. While part of the increase is seasonal, auto analysts say that the data shows that retail sales are flat at best and most likely declining — a sharp reversal for an industry accustomed to double-digit annual growth.

“Inventory levels for us now are very, very high,” said Huang Yi, the chairman of Zhongsheng Group, China’s fifth-largest dealership chain. “If I hadn’t done special offers in the first half of this year, my inventory would be even higher.”

Manufacturers have largely refused to cut production, and are putting heavy pressure on dealers to accept delivery of cars under their franchise agreements even though many dealers are struggling to find places to park them or ways to finance their swelling inventories. This prompted the government-controlled China Automobile Dealers Association to issue a rare appeal to automakers earlier this month.

“We call on manufacturers to be highly concerned about dealer inventories, and to take timely and effective measures to actively digest inventory, especially taking into account the financial strain on distributors, as manufacturers have to provide the necessary financing support to help dealers ride out the storm,” the association said.

Officially, though, most of the inventory problems are a nonissue for the government.

The Public Security Bureau, for example, has halted the release of data about slumping car registrations. Data on the steel sector has been repeatedly revised this year after a new method showed a steeper downturn than the government had acknowledged. And while rows of empty apartment buildings line highways outside major cities all over China, the government has not released information about the number of empty apartments since 2008.

Yet business people in a wide range of industries have little doubt that the Chinese economy is in trouble.

“Inventory used to flow in and out,” said Mr. Wu, the faucet and sink sales manager. “Now, it just sits there, and there’s more of it.”

Getting Chinese to stop saving and start spending is a hard sell

Qilai Shen/Bloomberg – A woman walks past an advertisement encouraging spending with credit cards in Shanghai.

By Keith B. Richburg,Published: July5

SHANGHAI — For three decades, China
has enjoyed astronomical growth through massive government investment and by becoming the world’s exporting powerhouse. But those days are coming to an end, and the government is looking to Chinese consumers to drive future expansion.

But a tradition of thrift and a historic mistrust of officialdom is thwarting efforts to persuade the Chinese to spend more, experts say. And with China’s economy in the midst of a major slowdown, the government has not yet moved away from restrictive policies that also discourage spending.

On Thursday, China made its latest move to combat the slowdown, cutting key interest rates — the second rate cut in a month.

Chinese remain among the world’s stingiest consumers. Household consumption in China accounted for a paltry 35 percent of the overall economy in 2010, compared with 71 percent for Americans and 57 percent for Europeans.

Chinese also save far more than others, with an average household savings rate of 38 percent in 2010, compared with just 3.9 percent for Americans and 2.8 percent for Japanese, according to figures compiled by Bloomberg Businessweek magazine, using statistics from the World Bank and the Organization for Economic Cooperation and Development, along with other data.

And while younger Chinese have begun to buy more, save less and take advantage of credit more often than their parents, the old habits appear to be eroding slowly and may change only with a new generation.

“I don’t see the need to consume that much,” said Patrick Zhou, 36, a married Shanghai lawyer with a 2½-year-old son. Zhou said he and his wife each save about half their income every month, which still leaves them with enough money to eat out regularly and take a yearly vacation. “We have our house. I have my car. We travel every year,” he said.

The high rate of savings contrasts with the increasingly visible consumerism in cities such as Beijing and Shanghai, which are filled with Ferraris, shopping malls and luxury boutiques.

Precedent and practicality

Chinese older than 50 cling to more conservative spending habits than those in their 30s and 40s, said Shaun Rein, managing director of the Shanghai-based China Market Research Group and author of a new book called “The End of Cheap China.’’

But the exception to the savings-first rule appears to be the 20-something generation, veritable spendthrifts compared with older Chinese, with “an effective savings rate of zero,” Rein said. These Chinese were born after their country’s opening to the world in 1978, grew up with relative affluence and want the latest iPad and iPhone.

The reasons Chinese save more and spend less are complex, stemming in part from tradition and in part from government policies that discourage consumption. People older than 50, who save more than 60 percent of their income, remember a period of economic hardship and political chaos: the “bitter years” of the Great Famine, from 1958 to 1961, and the violence of the Cultural Revolution, from 1966 to 1976.

Some younger Chinese have carried on that tradition of thrift. Tony Ren, a 30-year-old married Shanghai accountant, saves about half his $2,600 monthly salary but says he doesn’t feel he is wanting for anything. “Maybe I’m too busy to have a lot of time spending money,” he said.

But there are other very practical reasons that people in China save. Buying a home typically requires a down payment of at least 25 percent and more often 30 percent, an astronomical sum of money for many. Also, many here have their first, and often only, child in their 30s, which is when they begin saving for future education expenses.

Government shifting focus

Getting people to spend more has become the government’s latest mantra. “Expanding domestic demand, particularly consumer demand . . . is essential to ensuring China’s long-term, steady and robust economic development,” Premier Wen Jiabao told the legislature in his annual work report in March. “We will improve policies that encourage consumption.”

But changing the policies that discourage private consumption could prove difficult, requiring China’s Communist Party rulers to adopt a host of reform measures they have long resisted, such as freeing interest rates to rise and letting the Chinese currency float freely.

The policies introduced so far have been largely symbolic, according to experts. The policies include subsidies to allow people to purchase more energy-efficient home appliances such as air conditioners and flat-screen televisions. There also have been proposals for cutting import taxes on some consumer goods. A pilot program in Shanghai replaced a business tax with a value-added tax.

Chinese consumers who were interviewed agreed that the government could take several more decisive steps that would have a dramatic and direct impact on spending and savings habits. For example, credit could be made more available, and interest rates could be allowed to rise to reflect market rates.

Michael Pettis, a finance professor at Peking University and a senior associate at the Carnegie Endowment for International Peace, said the real problem is not that Chinese consumers spend so little, but that they have so little to spend. Household income accounts for just 50 percent of China’s gross domestic product, Pettis said, compared with the United States, where it accounts for 80 percent. That means, essentially, that the government’s share of the economy is far too large — or, as some Chinese say, the country is rich but the people are poor.

So while domestic consumption is growing, it accounts for only a small share of the overall economy because the state sector still looms so large.

“I think the cultural explanations of thrift miss the point,” Pettis said. “They’re spending too little because they own such a small share of GDP.”

Tom Doctoroff

What Chinese Consumers Want
Posted: 05/27/2012 3:45 pm

Apple has taken China by storm. A Starbucks can be found on practically every major street corner in coastal cities and beyond. From Nike to Buick to Siemens, Chinese consumers actively prefer Western brands over their domestic competitors. The rise of microbloggers, the popularity of rock bands with names like Hutong Fist and Catcher in the Rye, and even the newfound popularity of Christmas all seem to point toward a growing Westernization.

But don’t be deceived by appearances. In my new book, What Chinese Want, I argue consumers in China aren’t becoming “Western.” They are increasingly modern and international, but they remain distinctly Chinese. If I’ve learned anything from my 20 years working as an advertising executive in China, it is that successful Western brands craft their message here to be “global,” not “foreign” — so that they can become vessels of Chinese culture.

Understanding China’s consumer culture is a good starting point for understanding the nation itself, as it races toward superpower status. Though the country’s economy and society are evolving rapidly, the underlying cultural blueprint has remained more or less constant for thousands of years. China is a Confucian society, a quixotic combination of top-down patriarchy and bottom-up social mobility. Citizens are driven by an ever-present conflict between standing out and fitting in, between ambition and regimentation. In Chinese society, individuals have no identity apart from obligations to, and acknowledgment by, others. The clan and nation are the eternal pillars of identity. Western individualism — the idea of defining oneself independent of society — doesn’t exist.

Various youth subtribes intermittently bubble to the surface — see the recent rise of “vegetable males” (Chinese metrosexuals) and “Taobao maniacs” (aficionados of the auction website Taobao). But self-expression is generally frowned upon, and societal acknowledgment is still tantamount to success. Liberal arts majors are considered inferior to graduates with engineering or accounting degrees. Few dare to see a psychologist for fear of losing “face” — the respect or deference of others — or being branded sick. Failure to have a child is a grave disappointment.

The speed with which China’s citizens have embraced all things digital is one sign that things are in motion in the country. But e-commerce, which has changed the balance of power between retailers and consumers, didn’t take off until the Chinese need for reassurance was satisfied. Even when transactions are arranged online, most purchases are completed in person, with shoppers examining the product and handing over their cash offline.

Even digital self-expression needs to be safe, cloaked in anonymity. Social networking sites such as Sina Weibo (a Chinese version of Twitter), Renren and Kaixing Wang (Chinese versions of Facebook) have exploded. But users hide behind avatars and pseudonyms. A survey conducted by the advertising firm JWT, where I work, and IAC, the Internet holding company, found that less than a third of young Americans agreed with the statement “I feel free to do and say things [online] I wouldn’t do or say offline,” and 41% disagreed. Among Chinese respondents, 73% agreed, and just 9% disagreed.

Chinese at all socioeconomic levels try to “win” — that is, climb the ladder of success — while working within the system, not against it. In Chinese consumer culture, there is a constant tension between self-protection and displaying status. This struggle explains the existence of two seemingly conflicting lines of development. On the one hand, we see stratospheric savings rates, extreme price sensitivity and aversion to credit card interest payments. On the other, there is the Chinese fixation with luxury goods and a willingness to pay as much as 120% of one’s yearly income for a car.

Every day, the Chinese confront shredded social safety nets, a lack of institutions that protect individual wealth, contaminated food products and myriad other risks to home and health. The instinct of consumers to project status through material display is counterbalanced by conservative buying behavior. Protective benefits are the primary consideration for consumers. Even high-end paints must establish their lack of toxicity before touting the virtues of colorful self-expression. Safety is a big concern for all car buyers, at either end of the price spectrum.

To win a following among Chinese buyers, brands have to follow three rules. First and most important, products that are consumed in public, directly or indirectly, command huge price premiums relative to goods used in private. The leading mobile phone brands are international. The leading household appliance brands, by contrast, are cheaply priced domestic makers such as TCL, Changhong and Little Swan. According to a study by the U.K.-based retailer B&Q, the average middle-class Chinese spends only $15,000 to fit out a completely bare 1,000-square-foot apartment.

Luxury items are desired more as status investments than for their inherent beauty or craftsmanship. The Chinese are now the world’s most avid luxury shoppers, at least if trips abroad to cities like Hong Kong and Paris are taken into account. According to Global Refund, a company specializing in tax-free shopping for tourists, the Chinese account for 15% of all luxury items purchased in France but less than 2% of its visitors.

Public display is also a critical consideration in how global brands are repositioning themselves to attract Chinese consumers. Despite China’s tea culture, Starbucks successfully established itself as a public venue in which professional tribes gather to proclaim their affiliation with the new-generation elite. Both Pizza Hut and Häagen Dazs have built mega-franchises in China rooted in out-of-home consumption. (The $5 carton of vanilla to be eaten at home is a tough sell in China.)

The second rule is that the benefits of a product should be external, not internal. Even for luxury goods, celebrating individualism — with familiar Western notions like “what I want” and “how I feel” — doesn’t work in China. Automobiles need to make a statement about a man on his way up. BMW, for example, has successfully fused its global slogan of the “ultimate driving machine” with a Chinese-style declaration of ambition.

Sometimes the difference between internal versus external payoffs can be quite subtle. Spas and resorts do better when they promise not only relaxation but also recharged batteries. Infant formulas must promote intelligence, not happiness. Kids aren’t taken to Pizza Hut so that they can enjoy pizza; they are rewarded with academic “triumph feasts.” Beauty products must help a woman “move forward.” Even beer must do something. In Western countries, letting the good times roll is enough; in China, pilsner must bring people together, reinforce trust and promote mutual financial gain.

Emotional payoffs must be practical, even in matters of the heart. Valentine’s Day is almost as dear to the Chinese as the Lunar New Year, but they view it primarily as an opportunity for men to demonstrate their worthiness and commitment. In the U.S., De Beers’ slogan, “A Diamond is Forever,” glorifies eternal romance. In China, the same tagline connotes obligation, a familial covenant — rock solid, like the stone itself.

The last rule for positioning a brand in China is that products must address the need to navigate the crosscurrents of ambition and regimentation, of standing out while fitting in. Men want to succeed without violating the rules of the game, which is why wealthier individuals prefer Audis or BMWs over flashy Maseratis.

Luxury buyers want to demonstrate mastery of the system while remaining understated, hence the appeal of Mont Blanc’s six-point logo or Bottega Veneta’s signature cross weave–both conspicuously discreet. Young consumers want both stylishness and acceptance, so they opt for more conventionally hip fashion brands like Converse and Uniqlo.

Chinese parents are drawn to brands promising “stealthy learning” for their children: intellectual development masked as fun. Disney will succeed more as an educational franchise — its English learning centers are going gangbusters — than as a theme park. McDonald’s restaurants, temples of childhood delight in the West, have morphed into scholastic playgrounds in China: Happy Meals include collectible Snoopy figurines wearing costumes from around the world, while the McDonald’s website, hosted by Professor Ronald, offers Happy Courses for multiplication. Skippy peanut butter combines “delicious peanut taste” and “intelligent sandwich preparation.”

Even China’s love affair with Christmas — with big holiday sales and ubiquitous seasonal music, even in Communist Party buildings — advances a distinctly Chinese agenda. Santa is a symbol of progress; he represents the country’s growing comfort with a new global order, one into which it is determined to assimilate, without sacrificing the national interest. The holiday has become a way to project status in a culture in which individual identity is inextricably linked to external validation.

The American dream — wealth that culminates in freedom — is intoxicating for the Chinese. But whereas Americans dream of “independence,” Chinese crave “control” of their own destiny and command over the vagaries of daily life. Material similarities between Chinese and Americans mask fundamentally different emotional impulses. If Western brands can learn to meet China’s worldview on its own terms, perhaps the West as a whole can too.

Chinese shoppers less loyal to brands

Cultivating the Chinese Consumer

Companies rush to woo China’s new, monied middle class
Exporters, retailers want to sell to new middle class

Updated July 10, 2012, 10:54 a.m. ET
PepsiCo Chips Away at China


WUHAN, China—PepsiCo Inc. is expanding its business in China, where executives hope consumers will devour hot-and-sour fish soup potato chips, white fungus oatmeal and blueberry Gatorade, propelling the company toward its goal of becoming the biggest snack and beverage maker in the world’s second-largest economy.

Chief Executive Indra Nooyi cut the red ribbon of a new Lay’s potato-chip plant in China’s landlocked city of Wuhan on Tuesday, its sixth snack plant there and the latest sign of its three-year, $2.5 billion commitment to the fast-growing market. Company executives said it illustrates PepsiCo’s increasing focus on China’s hinterland, where consumers are spending more on food as their incomes rise. Many of them have yet to even try a potato chip, PepsiCo executives say.

“China will be the largest consumer market in the next decade, and PepsiCo aims to be the largest food and beverage company in the market,” said Ms. Nooyi in an interview, without specifying a timeframe.

Other efforts include a planned new research and development plant in Shanghai that could better tailor products to local tastes, potentially adding new products to a current lineup that includes hot-and-sour fish-soup potato chips, white fungus oatmeal and blueberry Gatorade. PepsiCo also plans to increase ad spending in the country. Executives declined to disclose details but said they will increase spending on Lay’s by 25%.

The company has high hopes for a deal completed earlier this year that transferred its local bottling operations to a local joint venture with significant market share. The sale will free Pepsi to concentrate on more food, marketing and research efforts, said Tim Minges, PepsiCo.’s chairman for Greater China.

The effort comes as the Purchase, N.Y., company—which makes Doritos corn chips, Tropicana juices and Quaker oatmeal—looks for ways to pump up its profits and satisfy investors disappointed by its U.S. market share loss in soda to rival Coca-Cola Co. Many have called for the company to split its lagging beverage business from its stronger snacks division.

PepsiCo’s executives say they are only making a dent in the country’s food and beverage markets so far. Consumption of potato chips in China is around one small bag every two to four weeks, compared with 15 bags in the same time period in the U.S., according to Mr. Minges. The average Chinese buys a beverage 230 times per year, while the average American buys 1,500 in the same period, Mr. Minges said.

“The growth potential is massive,” said Mr. Minges, noting that while many companies are concerned about a potential slowdown in China, PepsiCo is still eyeing the country as one of its booming markets.

Revenue from Pepsi’s emerging markets reached $22 billion in 2011, representing 34% of total revenue and nearly tripling from $8 billion in 2008. Much of that growth came from China, a company spokeswoman said. PepsiCo doesn’t break out its China revenue.

Offering the same Cool Ranch Doritos PepsiCo sells to U.S. consumers isn’t an option for China, said Mr. Minges. The company plans to open a new research and development center in Shanghai this fall, enabling it to create chip, drink, and oatmeal flavors and new textures that span beyond its current portfolio of such flavors as pork and ketchup, little tomato, cola-grilled chicken, and cucumber.

Mr. Minges said PepsiCo will also expand its oatmeal offerings, exploring more flavors that are inspired by traditional Chinese medicine, such as its current wolfberry flavor. Quaker launched in China two years ago and is beginning to take hold with consumers who are accustomed to eating rice porridge for breakfast.

PepsiCo is boosting its agricultural projects in China, attempting to improve potato yields and cut costs by improving its irrigation systems, Mr. Minges said.

China’s snack-food market is expected to reach an estimated 77 billion yuan (about $12 billion) by year-end, up 44% from 2008, according to research firm Euromonitor International. Its soda market is poised to reach 71 billion liters this year, nearly doubling from five years earlier, the firm projects.

PepsiCo was the fifth-largest seller of savory and sweet snacks in China in 2010, according to Euromonitor’s most-recent data.

In beverages, PepsiCo has a 4.4% market share, compared with Coke’s 15%. But its sale this year of its China bottling operations to a beverage joint venture including gTingyi (Cayman Islands) Holding Corp. and Asahi Group Holdings Ltd. will give it a lift there, analysts say. Tingyi itself has a 14% market share in China, according to Euromonitor International.

China Appears More Competitive Than US: Dalio

Lou Xiaoying has been praised in China for saving more than 30 abandoned babies over the years

The truly inspiring story of the Chinese rubbish collector who saved and raised THIRTY babies abandoned at the roadside

PUBLISHED: 08:27 EST, 30 July 2012 | UPDATED: 17:28 EST, 30 July 2012

A woman has been hailed a hero after details of her astonishing work with abandoned children has emerged.

Lou Xiaoying, now 88 and suffering from kidney failure, found and raised more than 30 abandoned Chinese babies from the streets of Jinhua, in the eastern Zhejiang province where she managed to make a living by recycling rubbish.

She and her late husband Li Zin, who died 17 years ago, kept four of the children and passed the others onto friends and family to start new lives.

Her youngest son Zhang Qilin – now aged just seven – was found in a dustbin by Lou when she was 82.

‘Even though I was already getting old I could not simply ignore the baby and leave him to die in the trash. He looked so sweet and so needy. I had to take him home with me,’ she said.

‘I took him back to our home, which is a very small modest house in the countryside and nursed him to health. He is now a thriving little boy, who is happy and healthy.

‘My older children all help look after Zhang Qilin, he is very special to all of us. I named him after the Chinese word for rare and precious.

‘The whole thing started when I found the first baby, a little girl back in 1972 when I was out collecting rubbish. She was just lying amongst the junk on the street, abandoned. She would have died had we not rescued her and taken her in.

‘Watching her grow and become stronger gave us such happiness and I realised I had a real love of caring for children.

‘I realised if we had strength enough to collect garbage how could we not recycle something as important as human lives,’ she explained.

‘These children need love and care. They are all precious human lives. I do not understand how people can leave such a vulnerable baby on the streets.

Lou, who has one biological daughter, Zhang Caiying and now aged 49, devoted her life to looking after the abandoned babies.

Word of her kind-hearted gestures has now spread in China, where thousands of babies are abandoned on the streets by their poverty stricken parents.

One fan explained: ‘She is shaming to governments, schools and people who stand by and do nothing. She has no money or power but she saved children from death or worse.’

‘In the local community she is well known and well respected for her work with the abandoned babies. She does her best. She is a local hero. But unfortunately there are far too many abandoned babies in China who have no hope of survival.

Only last week there was news of a baby lucky to be alive after having its throat cut and then put in a plastic bag and thrown in a dustbin at Anshan city, in northeast China’s Liaoning province.

The baby – a girl – was thought to be a victim of the country’s one child policy where parents restricted to only having a single child prefer boys and girls are unwanted and often discarde

Infanticide of ‘guilt children’ is still a problem in rural areas but it is rare in cities, where children are usually abandoned but not killed.

The baby’s fate has horrified China. The tot was spotted when a passerby went to throw some rubbish in the bin the and saw what he thought was a dead baby in the bag.

He told police that the child was purple and had not moved until he examined the bag more closely.

A resident who witnessed the girl being taken to hospital said: ‘She was still breathing and had a heartbeat. Blood from the wound stained the whole body.’

Doctors said that if the baby had been left in the bag a few minutes longer she would have died of suffocation and it had already been affected by the lack of oxygen hence the purple colour.

They said that the baby had been born premature and was probably between 32 and 34 weeks old and weighing just 1.4 kg.

A medic said that if the cut had been just a millimetre deep in the baby would have died.

China’s controversial ‘policy of birth planning’ was introduced in 1978 to reduce the strain on the country’s burgeoning population and reduce the strain on resources.

It officially restricts married, urban couples to having one child and those who break the rules have to pay a fine or fee.

Those who stick to the rules are usually awarded a certificate and can benefit financially, such as receiving an additional month’s salary every year until the child turns 14.

The policy allows exemptions in some cases – including rural couples, couples without siblings on either side, and ethnic minorities.

Residents of Hong Kong and Macau are exempt from the policy, as are foreign nationals living in China.

Certain rural parts of the country allow couples to have a second child if the first born is a girl but many parents feel pressured to produce an heir and end up abandoning the females.

If the second child is also a girl, no more children are allowed. It is extremely rare to find a family that has two sons.

The Chinese government claims that the policy has probably prevented more than 400 million births and in 2010 it was reported that for every 120 boys born there are 100 girls.

Critics inside China and around the world have condemned the policy and accused the government of enforcing abortions.

Despite the fact that it is illegal to kill newborn babies in the country, female infanticide and the failure to report female births is widely suspected, especially in rural areas.

An international conference on human rights, held ten years before the policy was introduced, proclaimed: ‘Parents have a basic human right to determine freely and responsibly the number and the spacing of their children.’

Despite this, an independent 2008 survey reported that 76 per cent of the Chinese population supported the policy.

China rushes to build a new generation of mega-dams as thirst for power grows
China is rushing to build a new generation of super-dams on its rivers. The Daily Telegraph was the first Western news organisation to be given access to one of these mega-projects in Yunnan province.

ByTom Phillips, Xiluodu, Yunnan province 8:00PM BST 13 Sep 2012

Who will get tough on China?

By Matt Miller, Published: July 25

If our presidential candidates can’t say “boo” to the National Rifle Association, how will they ever stand up to China?

As the campaign tiptoes back to its pre-Aurora trajectory, Democrats feel the drumbeat on Bain and taxes proves their side finally knows how to get tough. Republicans feel equally manly now that their man is slamming the White House for paying off cronies and leaking classified data on drones. But a better question beyond these macho attempts to manipulate media coverage is this: Who’s got the guts to finally get tough on China?

The question is unavoidable in the wake of a new report by Joseph Gagnon of the Peterson Institute entitled “Combating Widespread Currency Manipulation.” The headline finding is that countries seeking to hold down the value of their currencies now distort global capital flows to the tune of $1.5 trillion a year. The result, says Gagnon, a former economist at the Federal Reserve, is a “net drain on aggregate demand in the United States and the euro area by an amount roughly equal to the large output gaps” in these nations. Bottom line: “Currency manipulation is responsible for millions of lost jobs in the United States.”

Gagnon’s data shows that while some surprising countries (such as Denmark and Switzerland) are rigging exchange rates, China’s scale makes it the 800-pound panda here.

Worse, both parties have caved for years in the face of China’s bare-faced mercantilism — thanks to risk aversion and negotiating incompetence that have betrayed American workers. That’s the case made by H.W. Brock in an important yet underappreciated book published this year: “American Gridlock: Why The Right And Left Are Both Wrong.”

Brock, who runs the advisory firm Strategic Economic Decisions, says the first thing to understand is that China’s willingness to let the yuan appreciate by nearly 30 percent since 2005 does not mean (as the IMF declared Tuesday) that the problem has essentially been solved. We need to take a longer view.

As Brock shows, the yuan “is worth well under half what it was worth when the Chinese economy was in shambles as late as the early 1980s.” Between 1990 and 2011, moreover, the yuan depreciated by 46 percent versus the dollar. This is the opposite of what you’d expect in a booming developing nation that’s drawing overseas investors who lift demand for its currency (and the opposite of what happened to the yen as Japan rose, for example).

Brock reckons that the yuan’s value in dollar terms is arguably one-sixth of what it should be. He calls Washington’s failure to do anything about it a “political disgrace.” In his view, we should have conditioned China’s entry into the World Trade Organization a decade ago on a phaseout (over five years, say) of the country’s currency games, IP theft and related practices. If China failed to comply, we and the world should have imposed punitive tariffs.

Instead, by letting China rig the game, Brock argues, we’ve let slip priceless intellectual property and become a huge net debtor. What’s more, by letting the currency issue fester unaddressed for so long, we’ve encouraged multinational supply chains to become so dependent on Chinese operations that steep tariffs now would not only hurt China but the West as well.

During a critical decade, in other words, we let China eat our lunch.

Let me be clear: China’s rise as an economic power is a good thing for the world, and a great thing for the Chinese people. China is not the source of all our economic woes. But China’s brazen currency manipulation and routine theft of American intellectual property has tilted the playing field unfairly against U.S. jobs. We’d have lost jobs as China rose in any event. But these losses have been far larger than they would have been had our leaders not stood idly by as Beijing spent trillions buying dollars to keep its currency (and thus exports) cheap.

Why did our leaders fail to act? The apologists say the geopolitical situation is too delicate for such hardball. We want China to take its place in the community of nations. We don’t want China to implode as it rockets from third world to first. Beijing needs to create zillions of jobs each year lest it face social instability. Let’s cut them some slack, we’re basically told.

Well, yes, but. China’s challenges are real. But so are the challenges facing this nation’s eroding middle class (and the 23 million people seeking full-time work who can’t find it). It suits China’s interests to have American leaders thinking the place is a powder keg that could blow if pushed to reform too quickly.

If Brock is right, these rationalizations mean leaders in both American parties have been cowed into abandoning American interests.

When the other guy isn’t playing fair, after all, standing up to them isn’t “protectionism” — it’s economic self-defense. Doing nothing in the face of China’s behavior means playing the patsy.

Tim Geithner has occasionally jawboned China over currency values. Geithner also sent a strongly worded e-mail to the Brits on Libor rigging. We know how effective that was.

But the issue may finally be joined. On Monday, the latest step in China’s march to lock up global resource supplies came with state energy giant Cnooc’s record bid for Canadian producer Nexen (a deal U.S .regulators will have a role in reviewing). On Tuesday, Romney, who called China a currency manipulator early on, repeated the charge in his speech to the VFW. He plans on painting Obama as soft on Beijing.
Still, if Romney got rich at Bain in part by tapping China’s unfair advantages, how can he offer himself as the man who can bring China to heel?

About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
This entry was posted in China and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *


four + 5 =

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>