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Entries in China (485)

10:26AM

Chart(s) of the day: The Chinese economic "miracle" of past decade

From the Economist.

In a nutshell, it ain't their growing domestic consumption and it isn't their current account surplus (exporting prowess - see below), it's the amount of public investment.  And as the lower right (above) chart shows, China is revving that particular supply-side motor a lot higher than either Japan or South Korea did.  

All of this is to say: nothing miraculous here.  And no endless linear rocket upward either.

12:54PM

Signs of the coming agricultural interdependency

FT story on Marubeni, the Japanese trading house, buying US grain trader Gavilon - a major corn trader.

Why buy it?  China's recent forays into the US corn market suggest the rise of a similar long-term relationship as did early Chinese forays on soybeans years ago.  China now regularly imports massive amounts of US soybeans. A similar long-term transactional relationship now seems in the works regarding corn.  Marubeni already has an agreement with Sinograin, a state-owned Chinese company that manages the country's strategic food reserves.

Military strategists of varying levels of economic awareness imagine the US, Japan and China fighting naval battles over the South China Sea.  Meanwhile, truly deep economic/resources dependencies - such as these in food - are cropping up all over the place. 

Guess which relationships prevail?

And no, comparing this to globalization-cum-1914 is too ludicrous a notion to process.  It isn't comparing apples to oranges; it's comparing apples to mammals.

BTW, growing up on the edge of the US corn belt (SW Wisconsin), this issue is near and dear to my heart.

11:34AM

Time's Battleland: MILITARY SPENDING On Cyber Warfare, the American Public Is Constantly Being Played by the Pentagon

From a Washington Post piece describing “Plan X,” the Pentagon’s new push to develop cutting-edge offensive cyber weapons:

It makes sense “to take this on right now,” said Richard M. George, a former National Security Agency cyberdefense official. “Other countries are preparing for a cyberwar. If we’re not pushing the envelope in cyber, somebody else will.”

Read the entire post at Time's Battleland blog.

9:45AM

Time's Battleland: SYRIA When Military Intervention Makes Sense

Gideon Rachman at the Financial Times says that “diplomacy is still better than bombs” and that “moral outrage is just the starting point for a decision to intervene.”  He then goes through all the major powers in his piece Tuesday and cites reasons why each one is either holding back or holding things up. It’s one of those great ass-covering op-eds that’s supposed to make you look smart when the intervention does comes and it — gasp! — leads to more death and destruction.

Let me tell you why great powers intervene:  they don’t care about moral outrage and they don’t care about stopping the killing.  Moral outrage is a headline and nothing more, while the killing is either made faster or slower but never really “prevented.”

Great powers intervene when they can.  It’s as simple as that.  Good and bad don’t play into it.

Read the entire post at Time's Battleland blog.

11:34AM

Time's Battleland: NATIONAL SECURITY Death to “Resource Wars”!

Nice Washington Post piece on Saturday about how the “center of gravity” in global oil exploration and production is shifting to the Western hemisphere.  No, the bulk of global conventional oil reserves still sits in the Persian Gulf, but the larger point is worth exploring: we no longer project global futures where East and West logically fight over Middle East energy reserves.  Those expected long-term dynamics are collapsing right now before our eyes.

Read the entire post at Time's Battleland blog.

8:58AM

Here comes Chinese FDI in a very public way

This NYT story today really jumped out at me, and the Chinese just bought, in a signature Foreign Direct Investment move, the second-biggest movie chain in the US:  

The Wanda Group, a Chinese conglomerate with extensive interests in the entertainment business, has agreed to acquire AMC Entertainment, North America’s second-largest movie theater owner, in a deal that is valued at $2.6 billion, including roughly $2 billion in assumed debt, the companies said Sunday.

David Gray/Reuters

Gerardo I. Lopez, AMC’s chief executive, left, exchanged documents with Zhang Lin, vice president of the Wanda Group, during a ceremony in Beijing on Monday.

The acquisition creates the world’s largest theater group, the companies said. It also represents a significant expansion of Chinese influence in the American film industry. The industry has been looking to China for a vast new reservoir of ticket buyers for Hollywood movies, while joining Chinese investors to produce films like the planned “Iron Man 3” and teaming up to build studio facilities and a new Disney theme park in China.

The usual motives apply:  Chinese firm looking for know-how in an industry that's booming across China but isn't being as monetized as it could be - by Western standards.  For the US company, a crucial sub-plot emerges a few paras down the story:

In addition to the $2.6 billion value assigned to AMC’s debt and equity in the deal, Wanda is expected to invest $500 million for what the companies called “strategic and operating initiatives.” Mr. Wang said that the money would generally be used for renovation and other needs, but that specifics were up to Mr. Lopez and his team. Mr. Lopez said there was no plan in place for the money. But, he said, it might be used to retire debt, acquire new theaters or fix up old ones.

To me, this is a very positive development, and it's one we're going to read about countless times over the next decade. And yes, it will look and feel like Japanese money "buying up everything!" across America in the late 1980s/early 1990s.

But, of course, America has "suffered" these invading waves of FDI throughout our long history as a multinational economic union.  Chinese money will be just as good and useful as those of the other countries that preceeded it, and the further intertwinning of our economies will mitigate the craziness out of the Beltway crowd as they pine for a "near peer" competitor to justify the dropping floor of the defense budget.

You know, the Chinese were going to be the featured villain in the remake of "Red Dawn," but then Hollywood realized they'd be shutting themselves out of the Chinese box office, so they subbed in the North Koreans, which - of course - makes the film a complete and utter fantasy.  But it just goes to show you what all this financial connectivity leads too - cooler heads prevailing everywhere save among those fiercely dedicated fear-mongers in DC.

12:04AM

Red Dawn! Chinese state banks to enter US market

You just want to summon your inner Yakov Smirnov:

In America, banks loan you money.

In China, you loan banks money!

WSj front-page lead on "Chinese banks get nod in U.S."  The Fed Reserve okayed 3 state-run banks to enter and apparently didn't stop the first ever acquisition of a U.S. retail bank by one of them.

The goal of Chinese banks?  Initially, to service Chinese companies operating overseas and those foreign investors looking for "exposure" to the renminbi.

Exposure is the key word here - in both directions.  But, in general, I heartily approve.

China is the biggest saver in the system these past couple decades.  So yeah, access is crucial for an economy with shakey finances.

Of course, China's financial system has its own dangers, but - again - in general I greatly approve of even more financial interdependence.  

It'll help keep the China crazies inside the Pentagon on a leash.

10:04AM

Chart of the day: Why GM and SAIC naturally decided to pair up

Pretty obvious, actually. 

Far short of merger, but the same logic holds:  you are weak where I am strong and vice versa.  Why not ally and crush all opposition on global basis.

This would-be globally integrated enterprise as a preview of globalization's coming attractions.

From an Economist story on Chinese carmakers.

9:32AM

To what extent China can copycat the fracking revolution in US

Big FT piece.

China, we are told, has enough shale gas to cover its needs for 200 years.  It currently has no commercial production but wants to reach 60B cubic meters by 2020. A number of big Chinese and foreign energy firms are currently exploring China, with Sinopec running the big Tarim basin that is routinely described as the biggest in the world.

Dozens of exploratory wells have, so far, yielded mixed results.  The geology is just not the same as the US - more complex, so serious additional innovation will be required.  China's reserves are deeply buried and feature more clay, which is far harder to break up to release the gas.

China also lacks the US's existing pipeline network and trained personnel.

To overcome the stiffness of its three primary national energy companies, China has allowed foreign companies in and plans to liberalize prices on oil so its own companies will invest more.

Then there's the Chinese investment in US firms over here, a development that's been met with far less resistance than when CNOOC tried to buy Unocal seven years ago.  CNOOC plopped a solid $2b into Chesapeake Energy to access some of this technology.

This will be one follow-on to the US fracking revolution worth watching closely.

10:54AM

Planning for less Chinese growth

Citing FT here (pic from NYT), but there's been a slew of stories recently in WSJ and FT on same subject:  Western companies planning for less exports to China and looking more to home markets as a result.

As one exec put it: "The problem in emerging markets for us is really isolated to China."

Here also: "... the speed of the slowdown in Chinese demand has taken companies by surprise."

This is the higher labor costs kicking in prior to the domestic consumption driver kicking in enough to compensate for it - the essence of the middle-income trap.  

Doesn't mean companies don't expect growth in China or aren't planning on it.  Just means all this hype about the Chinese economy ruling all is rapidly dissipating.

8:33AM

Chart of the day: remittance "corridors"

From the Economist.

I just love global maps indicating flows - naturally.

What do we see here?

Per my vernacular, in sheer volumen we see New Core being fed remittances by expats living in Old Core.  But when it comes to countries relying heavily on remittances as percentage of GDP, it tends to be mostly Old/some New Core and it all pretty much goes to Gap countries.

Per my flow concept:  whatever the resource, it flows from regions where it is plentiful (here, earning opportunities) to where it is less so.  Yes, we think of India, China, Mexico as New Core and thus "made," but all share the reality of significant numbers of rural poor.  In truth, in most New Core countries, there is massive internal remittances flows.

What I love about this:  this is the best foreign aid there is, because people use it as they see fit.  

You may say to yourself:  What a drain on Core - especially US!

Studies have shown, however, that expats living in new countries spend something like 90% of their earnings in-country, sending about 1/10th home.  It's just that those flows still number in the billions, swamping anything we do on official developmental aid.

12:19PM

Final column at World Politics Review

The New Rules: Globalization's Future Depends on Stable U.S.-China-India Order

BY THOMAS P.M. BARNETT | 30 APR 2012
COLUMN

Editor's note: This will be the final appearance of Thomas P.M. Barnett's "The New Rules" column at World Politics Review. We'd like to take this opportunity to thank Tom for the insightful, compelling analysis he has offered WPR readers each week for the past three years, as well as for the support he has shown for WPR over that time. We wish him continued success.  

Amid all our current fears regarding the global economy’s potential “double dip” back into deep recession, a longer-term question stands out: How can a supposedly declining America protect the golden goose that is globalization while managing the rise of twin economic superpowers in the East -- namely, China and India? History says that three is a crowd when it comes to system stability. Invariably, some conflict will arise to trigger a two-against-one dynamic that must yield to either the stable stand-off of bipolarity, as during the Cold War, or the emergence through decisive conflict of an acknowledged unipolar hegemon, as in the early post-Cold War period.

Read the entire column at World Politics Review.

12:02AM

Chart of the day: You can import the milk cows. The water is another story

Fascinating WSJ piece on China importing cows like crazy to build up its dairy stock.

Since 2009, China has become the world's most important buyer of dairy cows, driving up prices for calves world-wide and putting pressure on other markets such as alfalfa and bull semen. China has imported nearly 250,000 live heifers, or cows that haven't yet reproduced, since 2009, according to data tracker Global Trade Information Services. Last year it spent more than $250 million on 100,000 foreign heifers, about 25 ships worth.

China old cows were European and it has a cattle ban on North America since the mad-cow disease scare in 2003, so it's buying up stock in Australia, New Zeland - even as far as Uruguay.

Story describes the setting-up of modern American-style dairy farms (our cows outproduce the world on a per-head basis), but the trick is the amount of fresh water they require.  All the places they import these cows from are relatively water rich (more global freshwater share than population share), whereas China is 22% of the world pop with 7% of the water.

Tricky business, that.

But clearly, the attempt shows how intent China is on continuing to try and remain food self-sufficient. China won't succeed, but it'll try like all get out.

12:02AM

Chart of the Day: Different listing of shale gas reserves globally

Previous one I had found (and used in brief) said:

  1. China 36.1 trillion cubic meters
  2. US 24.4
  3. Argentina 21.9
  4. Mexico 19.3
  5. South Africa (didn't write down because not in Pac)
  6. Australia 11.2
  7. Canada 11.0

Here's an old post that has similar 1-5 ranking expressed in tcf (like below), and the weird thing is, it agrees exactly with the FT numbers for China, Argentina, Mexico and South Africa but puts the US at 862.

This one, in bit FT full-pager says:

  1. China 1,275 tcf
  2. Argentina 774
  3. Mexico 681
  4. South Africa 485
  5. US 482
  6. Australia 396
  7. Canada 388

Big difference is US ranking/estimate.

Second one says EIA, as in U.S. Energy Information Agency, so I guess you gotta go with that one.  

Or is this just weird mistake by FT?

No mistake.  After some quick Googling it turns out the EIA said 862tcf a year ago and says 482tcf now, reducing its estimate of recoverable shale gas by 42%!

Betcha some industry experts refute that!

Will have to see where that number goes over time.

12:03AM

GM casts its global lot with Shanghai Automotive

Favorite subject of mine, that I highlight in the current brief: the creation of what fmr IMB CEO Sam Palmisano calls "globally integrated enterprises."

GM links itself up with Shanghai Automotive Industry Corp to create a GIE that looks to take on Honda, Tata, VW, etc on a global basis while cementing GM's participation in China's booming domestic car market.

GM's tie-up with SAIC is considered one of the region's most successful. GM and its partners in China have a 14% share of the auto market, the world's largest. The company's sales volumes have grown 41% since 2009.

GM chief exec: "SAIC is the principal relationship that we have around the globe now [italics mine] and we expect that to be the case in the future."

GM and SAIC are now jointly eyeing exports to LATAM and eventual production there.

Amazing stuff, as GM impresses with its bold global vision and execution.

8:39AM

WPR's The New Rules: In Globalized World, Time Is on America's Side

Second-to-last column at WPR.

There is a popular tendency to characterize globalization as an elite-based conspiracy or as something imposed by greedy outsiders upon unsuspecting native populations, hence the enduring belief in the possibility of its systemic reversal. In truth, the spread of modern globalization reflects a bottom-up demand function, not a top-down supply imposition. People simply crave connectivity -- in all its physical and virtual forms -- as well as the freedom of choice that it unleashes. This simple truth is worth remembering when we contemplate America’s global role in the decades ahead.

Read the entire column at World Politics Review.

1:56PM

Chart of the Day: China's capital stock compared

From the Economist, with arguments not exactly settled by the comparison.

Reality/fear is that too much of China's growth is via capital investment. Compared to other economies, that part seems undeniable.  But like with India, we're talking continental-sized economies where hundreds of millions of rural poor are still left behind, so investment is clearly in order for a very long time.

The per capita comparison, however, shows how China remains a poor country by modern standards.

Another interesting tidbit:

China's rising investment and falling consumption as a share of GDP are commonly portrayed as an economic anomaly. Yet this pattern is normal in a rapidly industrializing country. In a traditional agricultural economy farmers consume most of their income, but once industrialisation gets under way a rising share of national income goes to owners of capital, who invest it in factories and the like. Investment rises as a share of GDP, and consumption falls. During their peak periods of industrialisation, South Korea and Japan saw an even sharper rise in investment relative to GDP than China has seen over the past 20 years.

You can call this the glass-half-full argument on China's long-term growth, and it's just as true or no more false than the half-empty variant:  coastal China must shift from extensive to intensive growth, and there the labor crunch and demographic aging will force evolutions very similar to a developed economy.  But interior China is another whole economy ready to take off - again - like China Coastal has for 2-3 decades. Of course, not being coastal will make this a far harder task in terms of attracting FDI and the manufacturing it enables.

But that just speaks to a certain economic slowdown that is inevitable.  We have a strong West Germany economy (Coastal China) being forced to bring along/accommodate/prioritize somewhat an East Germany (interior China).  Coastal China/Beijing will do this for political stability reasons, but slow down the overall economy it will - even as it assured plenty of long-term growth and development (all that urbanization, for example).

Ah, the complexity of modern China.

7:28PM

The future of American agriculture has arrived

Been briefing and writing about this one going back to about . . . I wanna say 2006.  I remember the slide I had my old slidemaster Bradd Hayes generate for what was still the Blueprint for Action brief.

Here is the reality as captured in the piece: US demand flattening, China's skyrocketing - especially for dairy (it's a growing middle class, mind you).

The head of California Dairies: "We're in an evolution. No question."

Markets "once treated as an afterthought" are now "reshaping the relationship between rural America and the rest of the world."

What are you really exporting when you export milk - even milk powder?  Water.  Whether or not you take it out for packanging, a whole lot of water goes into milk - directly and indirectly.

That's why the Kiwis have been in the lead.

It wasn't just the geographic proximity but the excess of water on a per capita basis (New Zealand has about 5 times the water it needs).

California ag exports to China and HK are up 85% since 2008: "All of a sudden, milk powder has become this valuable commodity." The sent this year's Miss California to China to hawk pistachios.

Amber waves of grain, my friends, in a back-to-the-future development that marks the resurgence of the economy - with ag and energy in the lead.

And yeah, both are plenty high-tech.

2:50PM

Hollywood gets itself some Chinese

Old Jack Welch bit: you can't succeed in global economy without succeeding in China.

My addendum: you can't succeed in China unless you're Chinese.

Solution: Get yourself some Chinese.

Hollywood has seen overseas B.O. rise from a tiny share to well over half in recent years. More specifically, while the US market is flat, burgeoning middle class China's is booming.

WSJ sees two different markets, but I already see a Chinese market that, with incredible restrictions on the number of US imports, is already half-synched to our blockbuster mode.

You know about Spielberg already turning toward China for future financing.  This piece talks about Disney doing the same.  Co-productions will become the norm, connecting talent with bucks (literally).  Yes, nothing will change the flops-v-tentpoles ratio. Indeed, it is likely to rise in the short-run, but Hollywood is very adept at figuring these things out, much like Japan does in its very clever global marketing of anime.

In the meantime, we be treated to the glorious hysterics of the "Red Dawn" remake. [The Chinese dodged a movie bullet there, as the original script had them invading, but now we get the fantastically implausible depiction of North Korea doing the same - much like a recent (pretty good) video game "Homefront."  The kicker: MGM rebooted the script so as to not lose out on the growing Chinese box office.] But, over time, this will be a good collaboration and a bilateral image reshaper that benefits the planet.

9:24AM

WPR's The New Rules: Globalization in a Post-Hegemonic World

My third-to-last column at WPR:

International relations experts are pretty much down on everything nowadays. America, we are told, is incapable of global leadership: too discredited overseas, too few resources back home, too little will -- period. For a brief moment there, while China held up the global economy during the recent financial crisis, much credence was given to the notion that we were on the verge of a Chinese century. But that popular vision has also waned surprisingly quickly, and now the conventional wisdom centers on China’s great weaknesses, challenges and overall brittleness. Amazingly, where we spoke of a U.S.-China “G-2” arrangement just a few short years ago, now there is a sense that no one is in charge.

Read the entire column at World Politics Review.

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