RVs in China? Doesn't Make Sense

During my time “deep undercover” in Shenzhen, I saw that smaller Chinese companies really put an emphasis on foreign imported products, especially from Europe and the US. Higher class consumers have a lot of discretionary income and wanted the best products. This meant that imported goods were seen as the best.

This sentiment led a lot of small businesses to register their company, trademark their product and acquire businesses in Europe and the US. Now, businesses can claim that “this is a US product” even though Americans have never seen it. It doesn’t hurt that the RMB appreciation and depression of US/European asset prices are making things a lot cheaper.

China is a potentially huge market for many foreign products. Luxuries goods, cars, airplanes, vitamins, cosmetics, ect.  have all succeeded. This recent exuberance for the foreign products has quasi-blinded some business people in China.

One recent article I read in the LA Times titled "China has burgeoning market for RVs, entrepreneur says" made me laugh. 

China is hungry for the kind of recreational vehicles built in Southern California — at least according to the Chinese entrepreneur who struck a deal with a Riverside firm to build and export $5 billion worth of them.

The Chinese government has placed a focus on developing the RV industry as a cornerstone of the Chinese ideal of the happy home life, said Winston Chung.

"A family with an RV is a family more in harmony with each other," he said, speaking through a translator. "During vacations, people can get into the RV and enjoy quality family time."

Under Chung's agreement with MVP RV of Riverside, the company plans to manufacture the vehicles here and export them to China. However, Chung would not rule out moving operations to China in the future.

Chung spoke about the burgeoning market in China for the motor homes after a news conference with UC Riverside Chancellor Timothy P. White, where they announced Chung's $10-million donation to UCR's Bourns College of Engineering.

In an interview with The Times, a smiling Chung cheerfully detailed his plans to build and export 30,000 diesel-powered motor homes to China, and eventually to develop electric-powered RVs. Chung, 52, is the founder of battery maker Winston Global Energy.

The nascent Chinese RV industry has the potential for high profit margins, despite high taxes on gas-guzzling vehicles, Chung said. He added that the increasing value of the yuan, the Chinese currency, will make buying an RV more affordable for families. 

Yes. These RVs would be more affordable, but who would buy them?? Let's analyze.

• China has 1.3 billion people in a limited amount of space. People all live in high-rise apartment buildings to save space. Even those people who bought traditional American houses are squeezed together to an uncomfortable small area. There is just no room to park these things that would actually make sense unless its in a parking garage - but thats expensive.
• People in the US enjoy RVs for camping and exploring the country - esp in the midwest and western US. It takes advantage of the cheap(er) fuel prices and the interstate highway system with the comfort of your own hotel-room RV. In China, tolls for the freeways are very expensive and the gas isnt cheap either. It doesnt make sense to travel via RVs since trains, long distance buses and plane travel is so convenient and public transportation and cheap taxis are available everywhere. Also, hotels are cheap as well. 
• Mostly older people in the US have RVs. Chinese old people dont know how to drive.
• The people with the most RVs/Trailer homes in the US are for the poor. However, I dont foresee poor Chinese people choosing to live in RVs rather than their houses. 

To me, RVs just does not make sense in China. However, if Mr. Chung and his company, Global Winston Energy bought the company to cut costs and sell to US/Canadian consumers (just like Chinese car maker Geely bought Volvo), that would make some sense.

Otherwise, what are you thinking??

The New US Sputnik Moment

On the eve of Obama's State of the Union address, there are reports that he will center his speech on the theme of our generation's Sputnik moment.  

"Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik, we had no idea how we'd beat them to the moon," Obama will say, according to excerpts released by the White House. "The science wasn't there yet. NASA didn't even exist. But after investing in better research and education, we didn't just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs."

The contemporary Sputnik moment that exists right now is the competition with China. 

When international tests revealed that students in Shanghai ranked first in math and science in December, it stunned educators. Amy Chua then jumped on this sentiment with a provocative op-ed in the WSJ titled Why Asian Mothers are Superior to promote her new book, it created a fierce national debate that brought out the "USA! USA!" chanting American defenders/Chinese critics, here, here and here.

Although there could be debate on the validity of this the best way to teach children and the actual competitiveness of US education, the underlying theme is clear. While US kids are playing video games and out having fun, Chinese kids have private tutors and Sunday classes. While the US is cutting education budgets all over the country, China is increasing its own. No debate will change the fact that Chinese Confucian culture puts greater emphasis on education. Below is a great clip of Nicholas Kristof discussing this issue.

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Thomas Friedman actually first started the Sputnik discussion in an op-ed in late 2009 addressing China's huge investment in green energy with governmental support.

without declaring it, China is embarking on a new, parallel path of clean power deployment and innovation. It is the Sputnik of our day. We ignore it at our peril.

This sentiment has prodded both the Secretary of Energy and Commerce to refer to the Sputnik challenge in renewable energy, investment in infrastructure and high tech computing in recent speeches. 

While the US is bogged down with its fake repeal of "Obamacare", partisan bickering, tax cuts for the rich and bureaucratic hoops, China is strongly supporting the future renewable energy sector. Hopefully Obama can utilize the unifying sentiments from the Tuscon shooting and focuses it on the country's future. Who knows if the Republicans will listen. 

US Press Makes Hu Jintao Sweat Over Human Rights Question. Really??

I have been eagerly watching the coverage of the Chinese President, Hu Jintao, and his state visit to the US for the past 2 days. It has been made a big deal by media in both countries and occurs at an interesting point in China/US relations as China is now the 2nd largest economy in the world, surpassing Japan.

I read all the articles I could find online from Foreign Policy, Time and other sources to give me a sense of public discourse on the subject. Not only did I find more ideas for future blog posts, it gave me a feel for how the US viewed this visit and what the media wanted to accomplish.

The thing that most stood out before President Hu's arrival was the inclusion of a media press conference held with Obama. Multiple media sources stated that this was a concession the Chinese had to make in order to "get the State dinner." It would also be a symbol for human rights and free press to see the red China president take questions from a free media.

As the official "day of pomp and ceremony" arrived, I waited for the highly anticipated joint press conference. After brief opening statements from both leaders, 2 US and 2 Chinese reporters would be called to ask questions.

When the 1st US reporter began to ask his question, I knew it would be on the issue of human rights. It fit perfectly with the "finally, we can put him on the spot" mindset established in the US media. After the reporter asked his long question to Obama, he asked Hu:

How do you justify China's record, and do you think that's any of the business of the American people?

In reality, this was a softball question. It fits perfectly with (what I believe) the established Chinese answer:

A major part of human rights is providing citizens with food, shelter, jobs, healthcare, ect. and China has done that by lifting 500 million people out of poverty in the past (whatever) years. And no, its not any of your business because we believe in non-interference wrt other countries' internal affairs.

However, as I anticipated this answer when Obama first finished his, there was only silence. Hu Jintao didnt answer the question?! Instead he stood their with a confused look while the US media waited for his answer. After a brief silence, he went on to take a question from the next Chinese reporter. 

I personally never thought he tried to dodge it. The question was too easy. Instead, I thought that he probably didnt hear it. After the first question was raised in English, Obama answered in a long monologue. Only after that was there a translation of the question and Obama's answer. The translator also SUCKED! Not only did he constantly stumble on his Chinese through out the press conference, he translated many things wrong and omitted a lot of content.

However, if Hu didnt answer the question, I knew there would be a problem.  The major news in the media following would focus on it and say, "we put him on the spot and he just dodged it", "thats what an commie does" and "thats why the US system is so much better", ect. That would be terrible for China's rep.

Thankfully, the 2nd American reporter addressed the initial human rights question. After explaining he didnt hear it initially, President Hu gave his answer.

Thank god he answered it or all hell would've broke loose or will it anyways?

Today, while reading coverage of the visit online, I stumbled on Dana Milbank's op-ed piece on the Washington Post. The response and description of the press conference from the day before was exactly what I had anticipated.

Something about human rights just doesn't translate for Chinese President Hu Jintao.

President Obama granted him the full state-dinner treatment that President George W. Bush denied him five years ago - but in return, Hu had to put up with a news conference, which he had refused to do when Obama visited China. For a repressive ruler, facing a free press is about as pleasant a prospect as attending the Nobel Peace Prize ceremony.

After the leaders' standard opening statements full of the blah-blah about bilateral cooperation, the Associated Press's Ben Feller rose and asked a gutsy, forceful question.

Obama answered. The translator translated. All eyes turned to Hu - who said nothing.

Instead, he looked to a woman from China Central Television - the state-run network that answers to the Communist Party's propaganda department - who tossed him a softball about "friendship and mutual understanding."

But the next questioner, Bloomberg's Hans Nichols, gave Hu a lesson in press freedoms (by addressing the first not-answered question). 

In Beijing, that impertinence would get a reporter jailed. But Hu wasn't in Beijing. During the translation of Nichols's question, Hu held a palm up and smiled, as if he couldn't see what all the fuss was about. "Because of the technical translation and interpretation problem, I did not hear the question about the human rights," he explained - falsely, as it turns out.

It was a good moment for the American press. Feller and Nichols put the Chinese leader on the spot in a way that Obama, constrained by protocol, could not have done. On Wednesday afternoon, Obama and the press corps were justifiably on the same side, displaying the rights of free people.

Hu, however, ignored that question in favor of the gentler one from his employee at Chinese television. As luck would have it, Hu was perfectly prepared for the question, and, in his reply, looked down to read statistics from his notes.

Reporters glanced at each other, puzzled over Hu's ignoring of Feller's question. During the interminable translation into Mandarin of Hu's answer to the Chinese reporter's question, Obama flashed a grin at Gibbs.

Hu, his forehead shining, had another plant waiting in the crowd, a reporter from the state-run Xinhua news agency. But before Hu could get that lifeline tossed his way, the microphone went to the American side, where Nichols demanded an answer to the human-rights question. This time, Hu couldn't claim it was lost in translation.

"China is a developing country with a huge population and also a developing country in a crucial stage of reform," he explained. "In this context, China still faces many challenges in economic and social development, and a lot still needs to be done in China in terms of human rights."

No wonder Hu doesn't like questions: He might have to give an honest answer.

Of course it was a good moment for the US press. You posed a hard hitting question and made the President of China squirm. You made him sweat and succumb to the demands of the righteously free media. USA! USA! USA!

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.