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

...as 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??

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. 

China's Electrical Cars

The New York Times reported today on the future of electric cars in China and the committment to consumer subsidies and investment in safety and technology. At the same time, I started to watch the first commericals on TV for the BYD electric car. How interesting...

Chinese Savings = Religion

For the past few weeks, I've been spending more time with my grandparents. They came to visit our extended family for Chinese New Year and are enjoying the warm weather and nice accommodations here in Shenzhen. I try to see them at least 3-4x a week and I usually take them out to eat western food - something they enjoy but don't frequently do. 

Even though each of my grandparents still receive more than 3000 per month in retirement from the government as well as consistent money from my mom and uncles, they always stash it away. (My grandparents also have all of their medical bills taken care of by the gov't.) I have been trying for some time now to convince them to spend more money to enjoy their golden years. What’s wrong with more traveling, taking taxis and eating well? They won’t do it, but are always saving. Although they like eating McDonald's and Pizza Hut, they don't like to pay for it.

While the western media argues that due to the lack of a social safety net and social security system, Chinese people absolutely need to save - because the gov't won’t take care of them. I disagree with this notion. 

Saving money is a religion in China, especially for older generations. While some people have plenty of money saved away already, they still do it. Their daily lives have been routine for so long that there’s hardly any time or anywhere to spend the money. Buying groceries in the morning, cooking at home and playing cards and mahjong can only cost so much. 

Migrant workers are another example of savers. They typically make about 2000RMB or less every month and save the majority of it - sending some home. However, if you look at them, they all wear some decent clothes, laptops and all have better cell phones than I do. They just typically save on everyday expenses and sometimes make that big purchase, buying something more than one month's salary. 

I've recently thought that with improving living standards - esp. in the cities, Chinese middle class and white collar young people will evolve to a western-style lifestyle of using credit and spending lavishly without regard for price and cost. 

Some of my friends are like this. They spend most of their relatively high salary 10,000 RMB/month on iphones, designer clothing and taxis. They travel all over China and SE Asia. They're living the good life. I worry that if these people are the next generation, China will save less. 

One recent CNN report made me feel optimistic about these Chinese middle class. It is reported that there is an online group who tries to spend 100RMB/week. That's incredible! These people want to be more consceince of day-to-day spending and to be more mature of managing their own finances. Maybe there is hope yet for China and its future...

Check out the report:

China's (Optimistic) Future

During this current global recession and financial crisis, I've had many debates with fellow American friends living in Shenzhen on what will happen in China in the future. My friends (some of them have been in China for more than 5 years now and speak Mandarin fluently) often believe in a similar view as western media. 

"Chinese people let the totalitarian Chinese gov't rule in exchange for economic growth - at least 8%."

If this statement holds true, the current closures of thousands of factories directly linked to the export industry and the millions of workers that has join the unemployed poses a huge problem for the stability of the gov't and society in general. Recent unrest and footage of protesting workers have shown to be initial reactions of this issue. One of my friends even hypothesized that China will invade Taiwan just to distract the Chinese people and to increase nationalism sentiment.

I personally don’t understand where this "trade-off" between the Chinese people and gov't idea came from - because I disagree with it whole-heartedly. Although there have been riots - they have been relatively isolated and usually protesting justified inequalities perpetrated by local officials (often corrupt). In the video above, the toy factory closed unexpectedly and didn’t pay any of its workers. Is that the government's fault?

I personally see Chinese people as hard working, resilient people who have a history of getting through hard times. My parents lived through hard times with rationing and the Cultural Revolution where no one had anything. Just a few years ago, my hometown Harbin, didn’t have water for a week because of a chemical spill upstream that polluted the Songhua River. My extended family and grandparents still live there. Did people panic and riot? No. Everyone worked together to get through it. 

Look at the recent earthquake in Sichuan and the aftermath of that event. China is populated with people pulling together through hard times. In the absense of gov't help, villiagers banded together to help each other. People did what they could. While this happened, the gov't mobilized quickly and was on site immediately to help. Compare this to the 2005 Katrina disaster where the gov't didnt do anything for many days at the same time people were just waiting for people to "save them" at the New Orleans Superdome. 

The definition of a Chinese person's character is that he first blames himself before blaming someone else. He works to improve his own situation rather than waiting for the government to do something (Only when it’s too unfair do people take action). He is adaptive and stable. 

My outlook for the future China has always been optimistic. Here are the steps I foresee:

1. Although Chinese exports industries are getting hit hard; this is a natural situation that will realign the Chinese economy. Different businesses have already started to focus on selling their products, once destined for the US and Europe, in China.

2. The Chinese consumer, although not too confident currently, has savings and an ample appetite to spend. As Americans are riddled with debt and are saving more, Chinese consumers are still spending. Just walk around restaurants and malls and you won’t see any signs of recession here in Shenzhen. 

3. Migrant workers who lost their jobs are not going to riot. They are going to go home, start families, start businesses and live life. Less people are going to come back into the urban areas after Chinese New Year. In a recent report, China estimates about 20 million people have returned home.  Most people have made money in the past and have it saved up at home. And since living costs are drastically lower back in the smaller towns and villages, the savings go a long way. 

4. Thousands of 海归 (haigui - overseas Chinese) have returned to China - many with high level degrees. Since opportunities in the US, Europe and other areas of the world are gone, they have come back to China to find jobs. This will greatly enhance Chinese competitiveness and future development. 

5.  Local and provincial governments understand the importance of high tech industries as well as economically sustainable green technologies. This focus will help future economic prospects.

6. The government is trying to aid in everything it can. It’s helping small businesses get loans through banks and helping consumers spend with subsidies. More importantly, the Chinese stimulus package focuses on infrastructure projects that will greatly improve Chinese transportation efficiency. During the last Asian Financial Crisis, China's lead in investing in its infrastructure helped it sustain economic growth for more than 10 years. 

7. As the economy starts to realign away from exports, the Chinese gov't will slowly sell off US debt and appreciate the Chinese RMB to higher levels. With a higher RMB, China will then go buy even more assets all over the world to further its future development.