Sunday, December 26, 2010

Freeway Parking Lots in Beijing

If my memory serves me right, the traffic during the Beijing Olympics were awesome! Even though there was a dedicated lane for Olympic vehicles only on every street traffic was swift. Due to the implementation of the odd/even number system on alternate days, only half the allotted cars in Beijing were allowed on the road. That's the government taking charge at its best.

As the Olympics ended, local citizens discussed the necessity of policies such as the odd/even car plate system and others that helped combat pollution. Everyone agreed that it was preferable to keep the policies in place but not realistic.

Fast forward 27 months later and finally taking some kind of action to curb the congestion problems in Beijing. The government will begin to limit the amount of new vehicles coming onto the streets to only 240,000 next year. Although theres a rule that limits car use one day per week, the number of cars in Beijing has sky rocketed in the past 2 years. Reports claim that of December 19, the capital had 4.76 million vehicles, 700,000 more than that at the beginning of 2010 and contrasting with 2.6 million in 2005.

What are you going to do about the almost 5 million cars already on the roads?? How can the average speed of cars on Beijing roads be only 13mpg? ONLY 13?

Traffic in Beijing is not like normal cities where there is a rush hour in the morning going to work and in the evening getting out of work. The only time where there is not rush hour is between 9pm and 6am. At all other times, there will be consistent bumper to bumper traffic where its impossible to go above 20mpg.

The traffic is so bad that its difficult to schedule any kind of business dinners or dining out with friends unless someone comes incredibly late. Combine this with subway cars absolutely packed during rush hour and theres no real way to get around the city. That's why I always stay around one specific area (East 3rd ring) and rarely venture out anywhere when I'm in Beijing.

Please, Beijing gov't, take charge and get all of these cars off the street. I don't understand how you put this problem off until now, but do something! I understand that China wants to develop the auto industry as a pillar industry in China. I also understand that people buying cars increase GDP, but shouldn't there be a consideration of the social good? What good are cars if they just sit on freeways that resemble more like parking lots??

Friday, December 17, 2010

WSJ Tells the Truth on US/China Trade Deficit

With all of the anti-China mongering before the recent midterm elections, and constant pressure to adjust Chinese USD exchange rates, finally a US media source addresses the real issues.

In yesterday's WSJ article, Not Really 'Made in China', the author makes the point that the iphone, although thought of as ubiqutously American actually added almost 2 billion dollars to the US deficit with China last year.
Two academic researchers estimate that Apple Inc.'s iPhone—one of the best-selling U.S. technology products—actually added $1.9 billion to the U.S. trade deficit with China last year.

How is this possible? The researchers say traditional ways of measuring global trade produce the number but fail to reflect the complexities of global commerce where the design, manufacturing and assembly of products often involve several countries.

"A distorted picture" is the result, they say, one that exaggerates trade imbalances between nations.

Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step—assembling and shipping the phones.

So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.
Since the traditional trade deficit/surplus calculation counts the entire wholesale cost of the iphone as part of China's trade, there is a distorted view of the actual situation.

The vast majority of Chinese exports are made with various components that are first imported to China. Therefore, even if China implements currency exchange inform -  the traditional view of US politicians, very little would actually change with respect to Chinese exports. Although components of cost will rise for Chinese manufactures (ie. labor, overhead), the costs of parts that are foreign imported actually decreases for the factory. This means that the final price is about the same as the price before the currency adjustment. 

This means that the new currency policy would have little or no effect on the competitiveness of Chinese products wrt to American products. Although it would give China greater purchasing power for American goods, unless the US lowers export restrictions on high tech goods, exports wont increase much either.

Although there are issues with current US/China trade, its important for Americans to better understand that its not a black and white cause of Chinese exchange rate policies. There needs to be better analysis of the fundamental problems with the US economy and less Chinese fear-mongering. Thank you, WSJ for helping out.