Seeking reliable, objective sources on economics, foreign-policy and energy-policy issues.
China is upping its target for wind power to 100 gigawatts from 30 gigawatts. The new number equates to about 100 nuclear plants (yes, we know) and more generation capacity than in all of France… How much is that? The entire world had installed 94 gigawatts of wind power at the end of last year. Germany, the most wind power-friendly country on earth, has about 20 gigawatts…
Yes, central planning does allow change to happen faster [more…]
Did you know this policy is still operative? If the Chinese population gets old before it gets rich there will be severe social unrest.
As Communist Party elites hobnob in Beijing this week, the one-child policy has become a dangerous liability for current — and future — political leaders. So why not get rid of it? The reasons the policy is still around go to the heart of the government’s flawed decision-making process.
It’s unusual that the policy — implemented in 1979 as a temporary, “emergency” measure — has made headlines in the run-up to the meeting of the National People’s Congress, China’s rubber-stamp legislature. But last week, Zhao Baige, vice minister of the National Population and Family Planning Commission, hinted that there might be changes afoot — after which she was quickly contradicted by her higher-ups.
That’s an unsurprising response, given the political incentives at play. The top brass worry that if they were to relax the policy — for example by switching to a two-child policy — the ensuing flood of babies would overwhelm schools and hospitals, threatening the stability on which they have built their rule. Then there’s the loss of face, not to mention the fear of repercussions. How do you tell a mother who has been forcibly sterilized or who was forced to undergo an abortion that it was all a big mistake?
So expect the government to trumpet the widely held view that economic growth of the past two decades correlates somehow with the one-child policy. Never mind that China’s abundant supply of labor has been the foundation of the country’s economic boom or that population has little to do with productivity.
…Deng Xiaoping, who initiated the one-child policy, is no longer around to counsel China’s current leaders on how he planned to phase it out. And when China’s population begins to shrink and the labor pool dries up, China’s current leaders won’t be around, either.
[more]
Wired offers some useful insight into real-world China environmental policy.
The group of investors emphasized the scale of the problem, and the relatively low-tech nature of workable solutions. High-tech is simply too high-cost for the still-developing economy. Simon Littlewood, CEO of London Asia Capital, noted that some European technologies might be 100% more effective than their Chinese counterparts, but they cost 10 times more.
“The Chinese would love to have the best solution, but they’ll go for the cost-effective solution,” Littlewood said.
The easiest clean technologies to implement, the group said, were in energy efficiency, where newly installed technologies directly translate to decreased energy usage and bills. Both are especially important in China, where wages are still relatively low and two coal plants are coming online per week to meet rising energy demand from newly urban Chinese.
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James Fallows returns from China:
I’ve had this reaction on each of my previous return trips to America over the last 18 months: the abundance! The affluence! The choice!
I walked into a high-end Whole Foods grocery store in Washington this morning — and after a few minutes, had to walk out again.
The burnished fruits and vegetables. The forty varieties of bread. The souvenir-looking cuts of meat. The wines and cheeses. (The beers!!) Emotionally it was too much.I realized that my wife and I spend a significant amount of time each day in China thinking about how to get stuff — food, clothes, supplies. I know that America is on the verge of disastrous recession and that China is dynamic power of tomorrow, etc etc. But, my lord, life can be good here. (And where are the men pulling carts full of coal or scrap paper down the street, as if they were human beasts of burden?)
By tomorrow I won’t notice any more.
If you’re interested in seeing more about the Chinese “art factory” village of Dafen, previously described and depicted here and here, it is worth checking out this site from the German photographer Michael Wolf.
The main site brings up a collection of several dozen tiny thumbnails, which can be clicked individually to view. Each is a shot of an artist with one of his or her creations — for instance, several versions of the Mona Lisa. They are slow to load, at least for me in China, but worth the wait — as are many of Wolf’s other portfolios available on his site.
Since I can’t directly include one of Wolf’s professional shots, here is one more snapshot from my own visit to Dafen.The point to notice is the… breadth of the genres represented.
If you’re interested in seeing more about the Chinese “art factory” village of Dafen, previously described and depicted here and here, it is worth checking out this site from the German photographer Michael Wolf.
The main site brings up a collection of several dozen tiny thumbnails, which can be clicked individually to view. Each is a shot of an artist with one of his or her creations — for instance, several versions of the Mona Lisa. They are slow to load, at least for me in China, but worth the wait — as are many of Wolf’s other portfolios available on his site.
Since I can’t directly include one of Wolf’s professional shots, here is one more snapshot from my own visit to Dafen.The point to notice is the… breadth of the genres represented.
We have been wondering just how bad the air quality is. Here’s an update — James Fallows reports from China.
As promised earlier, I’m not planning to belabor the Beijing-air question while the Olympics are still more than half a year away. And as stated many times, I hope the Beijing Olympics will be a big success. China deserves to feel good about what it is putting together, and it will be best for the whole world if the Chinese people at large feel satisfied about this huge effort. I’m not being flip here: I’m rooting for China to pull this off just right and bask in deserved praise.
Also, these last three or four weeks in Beijing have included a lot of nice-seeming, if cold, days.
But the juxtaposition of the story below, from in today’s Olympian, a weekly supplement to the state-controlled China Daily in the months leading up to the Olympics; and the picture below that, a view out the apartment window at 1pm today; and the almost unbelievable NASA satellite shot that is the third image, taken on December 17, a recent “nice-seeming” day, prompts reference to a few other observations. (The satellite image came via Danwei.org and BeijingAir.)
One is this blog item two weeks ago by Tim Johnson of the McClatchy papers in Beijing, whom I don’t know. He asks whether it is dangerous for children to grow up in Beijing. For understandable reasons, he doesn’t directly answer the question — understandable because, I infer from the post, he has little kids here himself. But the post is full of interesting quotes, data, and observations, none of which are found in, say, The Olympian.
The other is the aforementioned Beijing Air blog, a knowledgeable-seeming site providing technical data about pollution and weather . I don’t know who produces it (apparently a Belgian named Tom), but at face value it is convincing. One of the point it consistently makes is that even days that seem nice in Beijing make not be acceptable for athletics (and general living), because of the very high level of very small particulates. These small particles are actually more dangerous than bigger, uglier, more easily visible contaminants, because the small ones can go deeper into your lungs.
Would it ever be possible to put him on trial for “crimes against humanity” or something like that?
Unlikely. As the protagonist in the movie Men in Tights said, “Unlike other Robin Hoods, I have a British accent.” Analogously, unlike Augusto Pinochet, Robert Mugabe is a Marxist. Crimes against humanity, no can do. He meant well.
– wrote Richard Fernandez in the comments to his post:
Africabeat links to news that China is withdrawing its support for Mugabe’s Zimbabwe. The Telegraph writes: “One of the Zimbabwe president’s oldest diplomatic friends, China yesterday told Lord Malloch Brown, the Foreign Office minister, that it was dropping all assistance except humanitarian aid. The move follows a decision by China, a permanent member of the United Nations security council, to work more closely with the international community in bringing pressure to bear on “rogue regimes”. It represents a major shift in its previous policy of refusing to attack the internal policies of long-standing allies.”
Africabeat writes, “at the very least, they can smell change in the air. Zimbabwe’s no longer bankable, no longer a country in which to make long-term investments in industries or in people. Politically, I get the sense that things could turn in any number of directions at any moment.” This is is probably a correct reading of the situation. China isn’t ditching Mugabe because they’ve suddenly acquired democratic principles. They’re ditching him because his ship is sinking. Couldn’t happen to a nicer guy.
Also in the comments, the African hand “F” wrote:
While it is true it “couldn’t happen to a nicer guy,” we should not conclude that the scales have fallen off China’s eyes for any moral reason. More likely, they recognize there is nothing left there to plunder. I was stationed in Tanzania when the Chinese signed an agreement to build a railway from Zambia in the southwest to the harbor of Dar es Salaam. The loan was substantial ($600 million sticks in my head) and repayment was to be in Tanzanian goods — like ivory and other commodities that were good value in East Africa. Nyerere was then telling the world the white regimes in South Africa, Mozambique and Rhodesia (present-day Zimbabwe) would fall, but building a railway that would avoid transiting those countries. When majority rule came to Zimbabwe and Mozambique the Tan-Zam Railway was a white elephant but the debt remained. And it was only after work was well along that Nyerere found out the railway gauge matched that in only two other countries in the world: China and South Africa. The Chinese have always been very sharp in their dealings with the Third World; morality was never an issue when I was watching developments in Africa. I cannot believe morality has anything to do with this move. Someone in the PRC Foreign Ministry took a long look at Mugabe and realized it was time to throw him to the wolves. F
A social revolution will soon transform China, and multinationals that do business there can’t afford to ignore it. So far, they have mostly focused on the country’s tiny minority of urban-affluent consumers. But as more Chinese migrate to the cities for higher-paying work, they are steadily climbing the income ladder. By 2011, McKinsey research suggests, China should have a lower middle class of 290 million people; by 2025, the upper middle class will be 520 million strong, with staggering disposable wealth. For many multinationals, this is the market of the future.
The latest McKinsey research China projects incredible wealth in less than 20 years:
By around 2011 the lower middle class will number some 290 million people, representing the largest segment in urban China and accounting for about 44 percent of the urban population, according to our model. Growth in this group should peak around 2015, with a total spending power of 4.8 trillion renminbi. A second transition is projected to occur in the following decade, when hundreds of millions will join the upper middle class. By 2025 this segment will comprise a staggering 520 million people—more than half of the expected urban population of China—with a combined total disposable income of 13.3 trillion renminbi.
Two features of China’s emerging middle class are already particularly notable. First, it will be unusually young compared with that of most developed markets, whose highest earners tend to be middle aged. In the United States, for example, income generally peaks between the ages of 45 to 54.9 Since higher-paying jobs, on average, require a higher level of education and training than what older generations have obtained, the Chinese government currently makes substantial investments in higher education for the younger cohorts, meaning that the country’s wealthiest consumers will be from 25 to 44 years old.10
Second, the urban middle class will dwarf the current urban-affluent segment in both size and total spending power. From 2010 onward we will see some distinct subsegments among the affluent—including the mass- and global-affluent categories—but they will still total only 40 million households by 2025, accounting for just 11 percent of all urban dwellers. Their total consumption will equal 5.7 trillion renminbi11—just 41 percent of middle-class consumption.
And they will be big savers:
Although the middle class will not reach its full spending potential for nearly 20 years, its household saving and consumption patterns have already begun to take shape. Today China’s thrifty households tuck away a quarter12 of their after-tax income—one of the highest saving rates13 in the world. Our research suggests that while the emerging middle class will continue to save heavily, they will also spend increasing amounts of money.
“People think China is cheap, but really, it’s fast.”
James Fallows, with his family, has lived in China for some time now. From reading his blog, I think about a year since he moved to Shanghai. The fruits of his investment are beginning to bloom. The July/August Atlantic Monthly is a special China issue, lead by Fallows’ China Makes, The World Takes. You may want to begin with the narrated slideshow — a good overview. At over eleven thousand words, Fallows’ survey of China’s factories and the people who man them is a must read.
Why go to China? For cheap? No — for speed and flexibility:
…Why does a foreign company come to our Mr. China? I asked Casey what he would tell me if I were in, say, some branch of the steel industry in Pittsburgh and was looking to cut costs. “Not interested,” he said. “The product’s too heavy, and you’ve probably already automated the process, so one person is pushing a button. It would cost you almost as much to have someone push the button in China.”
But what is of intense interest to him, he said, is a company that has built up a brand name and relationships with retailers, and knows what it wants to promote and sell next—and needs to save time and money in manufacturing a product that requires a fair amount of assembly. “That is where we can help, because you will come here and see factories that are better than the ones you’ve been working with in America or Germany.”
Here are a few examples, all based on real-world cases: You have announced a major new product, which has gotten great buzz in the press. But close to release time, you discover a design problem that must be fixed—and no U.S. factory can adjust its production process in time.
The Chinese factories can respond more quickly, and not simply because of 12-hour workdays. “Anyplace else, you’d have to import different raw materials and components,” Casey told me. “Here, you’ve got nine different suppliers within a mile, and they can bring a sample over that afternoon. People think China is cheap, but really, it’s fast.” Moreover, the Chinese factories use more human labor, and fewer expensive robots or assembly machines, than their counterparts in rich countries. “People are the most adaptable machines,” an American industrial designer who works in China told me. “Machines need to be reprogrammed. You can have people doing something entirely different next week.”
Or: You are an American inventor with a product you think has “green” potential for household energy savings. But you need to get it to market fast, because you think big companies may be trying the same thing, and you need to meet a target retail price of $100. “No place but China to do this,” Mr. China said, as he showed me the finished product.
For the world’s most efficient supply chain:
Or: You are a very famous American company, and you worry that you’ve tied up too much capital keeping inventory for retail stores at several supply depots in America. With Mr. China’s help, you start emphasizing direct retail sales on your Web site—and do all the shipping and fulfillment from one supply depot, run by young Chinese women in Shenzhen, who can ship directly to specific retail stores.
Over the course of repeated visits to Shenzhen—the breakfasts!—and visits to other manufacturing regions, I heard about many similar cases and saw some of the tools that have made it possible for Western countries to view China as their manufacturing heartland.
Some involve computerized knowledge. Casey’s PCH has a Google Earth–like system that incorporates what he has learned in 10 years of dealing with Chinese subcontractors. You name a product you want to make—say, a new case or headset for a mobile phone. Casey clicks on the map and shows the companies that can produce the necessary components—and exactly how far they are from each other in travel time. This is hard-won knowledge in an area where city maps are out of date as soon as they are published and addresses are approximate. (Casey’s are keyed in with GPS coordinates, discreetly read from his GPS-equipped mobile phone when he visits each factory.) If a factory looks promising, you click again and get interior and exterior photos, a rundown on the management, in some cases videos of the assembly line in action, plus spec sheets and engineering drawings for orders they have already filled. Similar programs allow Casey and his clients to see which ship, plane, or truck their products are on anywhere in the world, and the amount of stock on hand in any warehouse or depot. (How do they know? Each finished piece and almost every component has an individual bar code that is scanned practically every time it is touched.)
The idea that your supply chain is critical intellectual property is obvious. That is why we know so little of the origins of our shiny new MacBook Pro or HP widescreen display. It also highlights why how a company differentiates through innovation and design [e.g., Apple] because it’s products are likely made on the same assembly line as competitors.
I could describe many installations, but I was fascinated by two. The first represents one extreme in automation. It is owned and operated by Inventec, one of five companies based in Taiwan that together produce the vast majority of laptop and notebook computers sold under any brand anywhere in the world. Everyone in America has heard of Dell, Sony, Compaq, HP, Lenovo-IBM ThinkPad, Apple, NEC, Gateway, Toshiba. Almost no one has heard of Quanta, Compal, Inventec, Wistron, Asustek. Yet nearly 90 percent of laptops and notebooks sold under the famous brand names are actually made by one of these five companies in their factories in mainland China. I have seen a factory with three “competing” brand names coming off the same line.
The Inventec installation I saw was in an export-processing zone in Shanghai specially created for the company, in which imported components for manufacturing and finished products for export were free of the usual duties or taxes. It turns out more than 30,000 notebook computers per day, under one of the brand names listed above. Each day, an Inventec plant on the same campus produces hundreds of large, famous-brand-name server computers to run Internet traffic.
This is today’s rough counterpart to the Ford Motor Company’s old River Rouge works. In the heyday of The Rouge, rubber, steel, and other raw materials would come into the plant, and finished autos would come out. Here, naked green circuit boards, capacitors, chip sets, and other components come in each day, and notebook computers come out. Some advanced components arrive already assembled: disk drives from Taiwan or Singapore, LCD screens from Korea or Japan, keyboards and power supplies from other plants in China.
The overall process looks the way you would expect a high-tech assembly line to. Conveyers and robots take the evolving computer from station to station; each unit arrives in front of a worker a split second after she has finished with the previous one. Before a component goes into a machine, its bar code is scanned to be sure it is the right part; after it is added, the machine is “check-weighed” to see that its new weight is correct. Hundreds of tiny transistors, chips, and other electronic parts are attached to each circuit board by “pick and place” robots, whose multiple arms move almost too fast to follow. The welds on the board are scanned with lasers for defects. Any with problems are set aside for women specialists, looking through huge magnifying glasses, to reweld. Why did this factory invest so much in robots and machine tools? I asked a supervisor from Taiwan. “People can’t do it precisely enough,” was his answer. These factories automate not what’s too expensive but what’s too delicate for human beings to perform.
Did you know that new USB headset you just bought was packed and shipped from China?
The other facility that intrigued me, one of Liam Casey’s in Shenzhen, handled online orders for a different well-known American company. I was there around dawn, which was crunch time. Because of the 12-hour time difference from the U.S. East Coast, orders Americans place in the late afternoon arrive in China in the dead of night. As I watched, a customer in Palatine, Illinois, perhaps shopping from his office, clicked on the American company’s Web site to order two $25 accessories. A few seconds later, the order appeared on the screen 7,800 miles away in Shenzhen. It automatically generated a packing and address slip and several bar-code labels. One young woman put the address label on a brown cardboard shipping box and the packing slip inside. The box moved down a conveyer belt to another woman working a “pick to light” system: She stood in front of a kind of cupboard with a separate open-fronted bin for each item customers might order from the Web site; a light turned on over each bin holding a part specified in the latest order. She picked the item out of that bin, ran it past a scanner that checked its number (and signaled the light to go off), and put it in the box. More check- weighing and rescanning followed, and when the box was sealed, young men added it to a shipping pallet.
By the time the night shift was ready to leave—8 a.m. China time, 7 p.m. in Palatine, 8 p.m. on the U.S. East Coast—the volume of orders from America was tapering off. More important, the FedEx pickup time was drawing near. At 9 a.m. couriers would arrive and rush the pallets to the Hong Kong airport. The FedEx flight to Anchorage would leave by 6 p.m., and when it got there, the goods on this company’s pallets would be combined with other Chinese exports and re-sorted for destinations in America. Forty-eight hours after the man in Palatine clicked “Buy it now!” on his computer, the item showed up at his door. Its return address was a company warehouse in the United States; a small Made in China label was on the bottom of the box.
Read on, enjoy…
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