Fili’s world

(This is the second part to a post started here)

Western arrogance and misconceptions about the Chinese are everywhere, forming clichés that are downright absurd. Like the trend of the so-called Chinese medicine and Chinese wisdom that everybody quotes and acts upon even though it has nothing to do with Chinese culture. A funny one that I keep hearing in the business-oriented world is the myth saying that the Chinese character for "Crisis" is made up of "Danger" and "Opportunity". I've heard so many Israelis use that when discussing China's growing economic power that I had to check it out for myself and I've concluded that it's some-sort of practical joke probably based on an MBA myth formed by some Chinese person to show how all of us "westerners" are complete fools for things that sound cool but that we don't understand. "Pinyin Info", with a wonderful article, explains this very silly mistake, and has confirmed my Wenlin checkup.

"So, Mr. ambassador - and correct me if I'm wrong, I was overwhelmed by the wisdom of Chinese language as I understand that in Chinese crisis means both danger and opportunity", the host continues with his display of knowledge. The Chinese ambassador finds it hard to maintain "face" responding with a very wide smile and a strong nod. I then imagine a big cartoon-bubble coming out from his head with a "Gosh, we're so trendy now. We never expected it would be THIS easy".

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Gary Hufbauer, from the Institute for International Economics in Washington DC went on to the main lection of the evening termed "China Bashing".

Gary has been kind enough to send me his presentation and article for us to be able to reeducated ourselves about the interaction between the Chinese and the US. Even with all the books that I've read lately about the Asian economy, I was quite surprised to see how complicated things are right now.

I'll try and sum his lecture with the main points, in my view:

• The US is in trouble.
• The US is in real trouble.
• The US will be in an even bigger trouble.

Not clear enough?

• The US has an enormous deposit, 20-25% stemming from China.
• China hold an unbelievable number of US bonds, that is moderately sold today would impact US economy severally.
• In order to protect itself, instead of thinking how to improve the US economy and face the competition (danger and opportunity, right?), US has resulted in a re-run of the Japanese Bashing in the 80s - "China Bashing".
• The US is trying to fight China's smart economic moves with strong actions that will probably help them very little.
• China is a much bigger threat to the US than Japan ever was. The Chinese market is more open and welcoming than the Japanese market ever was, and the Chinese have a big population in the US with strong ties and an influential lobby by American companies needing the Chinese economy.
• The US is fighting China on a few battles : Revaluation debate (the RMB being set in a low rate compared to it's actual power), IPR - Intellectual Property Right (China not enforcing Copyrights), and national security (CNOOC, a Chinese oil corporation seeking to buy a big American one). As somebody mentioned afterwards, these issues are a lot easier politically for the Americans to act on than human rights.
• Of all the recommendations there's one I strongly agree with - "The US should adjust better". I even think it should be "The world should adjust better".
• It would be shown again and again throughout the conference that it seems as though the Chinese are making good decisions and are quite clever in how they've been managing their affairs in the US-China front.

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To give another perspective on China, Prof Marvin Samuels from the Asian studies department, now residing in China, was called to the speakers stand.

Main points :

• China is a world economic power, but it has yet to address it's real potential of domestic growth.
• China is advancing its infrastructure and fixed-asset investments in an unprecedented rate. "The overcoming of distance" (80000km of roads in 1980, 2.3m km of roads estimated in 2010), urbanization (from 19% in 1990 to 46% last year) - social change is daily, hourly. Urban population now at 500 million and in Shanghai alone there are 4000 new high-rise buildings put up since 1992 (While Manhattan has 2000, 30% pre world-war 2).
• May 1998 was critical point in time as the central bank authorized consumer credit to allow home mortgages. In 1999 the central bank authorized to expand consumer credit so everybody started buying a car.
• In Communist China - there's now a growth in "middle class", forming 10% of the population and increasing by 2% yearly. By 2020 middle-class in China will exceed the US population.
• Known numbers - GDP yearly growth of ~10% with 2% inflation and that's after trying to "cool off" the economy.
• US politicians believe that China is export driven. It's wrong, it's a rationality to cover US failure. US keeps losing industries -power-plants, mass-transit systems, highways, materials industry. Who's fault is it? Not the Chinese.
•  IPR - until there's an incentive for the Chinese to enforce - it won't happen. Piracy is starting to be bad for the Chinese and that's when it's going to change.
• China, economically speaking, it only at its Bar-Mitzva (~13 years), the question is how they will become "adults".