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Prelude: I'm back to 1800s
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the day I came back from my last China trip, my wife and I had a chance to walk over along the river next to our community,
"This is unbelievably beautiful, isn't it?", my wife said. I couldn't agree more. At one side of the
pathway that we walk on it's a Golf course, the other it's bushes, small trees, reeds in dry yellow at
the river bank and rural beaches. Through the slender silhouette of the reeds we could see ducks swimming
around. On the horizon is the south part of the Manhattan skyline, simmering in the warm winner sunshine
beneath the lightly blue skey.
"Sure", I said, "you'd never have anything like this in Beijing or Shanghai... a totally natural and
eautiful setting with 15 minutes of commute to the business center. But, you know, the price in Beijing
or Shanghai, or even ShenZhen, is higher than here."
"Not just that." my wife pointed to a few high rises under construction at the river front, "so we have, let's see,
6 or 7 high rises going up, less than 1 or 2 development projects in Beijing or Shanghai, and all the sudden the
local real estate market get totally flooded. What happened?"
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when I flied back from Shanghai and waiting for a transfer to LA, I sat next to an old gentlemen in
San Francisco's airport. He's a retired professor from New Mexico, and has been working in China for
a Japanese energy company since 2000.
"You must have seen the most dramatic changes in China", I said.
"You kidding... every month I go back to US and then back to Shanghai, it's different. I never seen
anything like that in my life. And I talked to people here and they don't really believe me.
You know, everytime I come back, I feel like I'm back to year 1800."
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Fall of the Empire
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US has been the most productive force of human civilization, hands down, it invented assembly line, trust and
anti-trust, semi, gene therapy, computer, internet... and lastly, google. And it invented the mid class,
a new society format where wealth is more evenly distributed in a large scale that's never before in human
history.
But now, to say the least, it's very challenged,
Considering a short 6 years ago, pre 2000, US was as high as sky.
so really what happened?
this got to be a huge subject. My short list of answers to the questions is:
1) US people getting content, lazy, and wasteful,
It's everyone first impression, and also backed by all kinds of scientfic data, that Americans
ranks among the worlds fattest nations. Heck, even myself is probably 20 lbs heavier than most of my
peers in China. There is probably no better indicator that symbolizes the
vast resource consumed and sometimes wasted by Americans than, if I can be blant, a big fat ass.
there are many symptoms of American consuming too much, and concuming too much than they produce... from
Buffet eating, to SUV, to McMansions. But the most problematic one is probably one less singled out: sprawling.
no place that I have seen has more sprawling issues than LA. Millions of people keep moving from point A to point B to point C
everyday on a web of streets over some 1000 square miles, with 12 lane highways often meshed with local streets, which creates
incurable traffic jams. The sheer energy it takes to get LA just to function is astonishing. But more sad than anything is that such energy,
all the burned gas on the jammed or moving highway, once it's consumed it's gone instantly,
there is no residual value, there is no depreciation schedule. All the efforts that the world spending
to explore, to extract, to refine, to distribute to the local gas station, it's just gone forever.
Or even worse, if you count all the pollution consequences.
Dring in LA you will see that other than the little downtown, and strips on the beach, you'd only see a
building over 3 floors once in a long long while. It's very inffecient to move electricity, gas, water, sewerage this way.
The other problem with sprawling is that there are too many little towns.
Each may have its civil gov't branches, police, and often its own schools.
2) extremely high cost for business, legal and medical expense etc, lack of worker population growth, end result is low productivity output
we all know that the most expensive component cost in a GM's car is not still, it's the health care cost for its employees,
we all know the most feared thing in American is not a gun, it's a letter notifying that you are sued,
here I cite two more everyday examples. In the city we live in now, there is a science center that is undergoing some
renovation with the price tag is $104m. From the outside I can see it's adding two wings of maybe 10k square
meter of display and activity space. And it takes 2 long years to do the job.
there is another project in the city, one company was order to pay $500m to clean up some land, of size about
a football field, that it polluted sometime before. $500m, $500m burned just for clean up. .
With that money and time, you can build an Olympic-ready stadium in a 2nd-tier city in China. Not too
long ago I read a news about a dorm-type stadium in NanTong, Jiangsu, much like the Dallas Cowboy stadium,
with cost less than $150m. The world's biggest shopping mall, located in DongGuan, which models after
the Las Vegas casinos and Dislayland, plus the mall of size of 6 football stadium, costed only $1.3B from start to finish.
competitive landsacped has change,d for a long while American owns the world productivity book, with Japan took
it away for a while before squandering it. Now, thanks to the knowledge transfer and general free-trade global
environment, China defines the world productivity by far. In US, often we burn through a huge pile of cash with little
to nothing to show at the end.
3) a reward system that encourages more derative activities, such as sports and entertainment, speculation, etc
many of the so-called "service economy" are expensive maintainence. The product of "service", unfortunately, often has
no lasting residual value, once they are done they are gone. To think about it, if you put up a skyscraper in New York
or Chicago, such efforts have lasting value in both economic and social sense. Their "real" depreciation rate is often v
ery little, or even negative.
On the contrast, the depreciation rate of many service activities are almost infinite because they disapppear right away.
this year everyone was a bit transfixed by the fact that the average bonus for a Goldman Sacks
employee is at $620k. Naturally a great percentage of the best minds are attracted to the finance industry.
While one can still argue that investement bankers, who grow companies instead of corns, are still doing
a great service to the soceity, one can't keep wondering the other less glorious part of the Wall St, namingly trading or
speculating, has much if any social value. Jim Cramer, one of the more popular talk heads, calls all hedge funds
predators.
4) war,
in the last 50 years, post WW2, almost any country involved in war activities has been greatly cursed.
German and Japan from WWII, they have to start from basically a ruin. Fortunately they have the help of US and they succedded.
Viet Nam haunted US for 20 years. Afhangstan very much became the last straw that broke USSR's back. Same true for China.
China was soundly rejected by the world when it had the policy of "exporting revolution". China's great rise came
possible only after Deng decided to give up paranoid foreign policies, and join the world community as a citizen.
The war in Iraq will probably go into history not too much different as the USSR's in Afhangstan. It has cost US the great
good will it has accumulated with the whole world, through sweart, blood and lives, during the last 100 years.
still, except for the war, factor 1 to 3 have been existing for at least 20 years, and war is more or less an isolated event.
So what exactly is the delta after 2000?
the delta, is the rising of China.
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What's the cause?
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the greatest invisible power shift:
US used to be the gatekeeper for most of the human knowledge.
After 2000, with internet and then google, the greated amount of
knowledge transfer in history occurred
while most of people are fixed by the headlines after "9.11".
many walls, many lines, many boundaries, that didn't fall to bombs through all human history, crumbled to the little
net of fiber optics, to the power of ration, knowledge, wisdom, and inspirations that those fiber optics bring in,
Great nations always stand on the shoulders of each other. China and Egypt invented paper,
but more complex scientific knowledge didn't really flow accoss the boundary of a mere human head utill
German invented the modern printing machine.
China is the apparently the biggest beneficiary.
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WTO, break through
we all know knowledge itself is not going create an economy boom.
There are other enabling factors that must be ready, particulaly capital and market.
Fortunately, at the end of 2001, China joined the WTO.
Few people now seem to remember what a headeche every year it was for China to renew the
"most favorable nation" status with US. Every April China has to send a envey to Washington DC,
begging with gifts as hands, buying airplances etc.
Pre and post WTO, day and light difference. With a full WTO membership, China instantly
became the run-away winner of capital flow destination in the new global free-trade environment.
Annual FDI to China quick went to over $50B, overtaking that to US, nd stayed there to today.
More than just capital, all the technology, both equipment and knowledge, and management,
both technical and modern supply chain know-hows, investment,
marketing etc etc were poured over. Particularly, on the manufacturing side, except for the most
advanced fields such as airplane, China accquired almost all the accumulated human knowledges on
"how-to" without paying much of a fee at all.
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starting from the top,
I have wrote that I believe Premie Zhu should take the most credit for making the decision
to push for WTO at any cost. Whatever China said it'd give up, is far exceeded by what it gained.
WTO is the second most important political decisions that had ever been made after Mao's era,
only after Deng's decision to "open up", to join the world community.
To Jiang's credit, his quantessential act of "counting money, making no noise" worked
marvelously for China, putting and keeping China on the track. Now Hu and Wen's new
social re-engineering is trying to address the secondary problems such as distribution.
China is fortunately to have the longest run of politically stable periods.
All 3 generations of the leaders are not the typical king type... they are wise enough, brave enough,
and daring enough to give up the total power with peace. Probably the first time in Chinese history.
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it took the whole villege
A few weeks ago someone asking who should have the biggest credit for the China
rising. Many answers of course, my own entry was the labor girls who worked in
the toy and textile factories. The reason is that they digged the "first gold nugguts" for China.
Great infrastructure buidling. Then Shanghai invented a way to modernize its cityscape, and the model
got copied to all over the country. ZheJiang people find they can conqure the world by
focusing on small things, ShenZhen has HongKong commerce connections, DongGuan and Yangzi Delta
embraced Taiwan, ShanDong and Northeast with Japan and Korea. Waves and waves of industry
consolidation and upgrade, from TCL to Haier to SanYi Heavy Industry. Very much everywhere
and everybody.
Indeed, everywhere, and everybody.
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the force going and going forward: development capacity
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it's nothing short of breath taking to describle the progress that China has made,
I was to write a long list but then figured it's better to let everyone to
fill the blanks for the question of "just how good is it?",
since to 100 pair of eyes there must have 100 different angles.
Nothing can copmare to the vast suburb in Americana yet, but for the citiscape,
imho most of major Chinese cities are now more modern than compariable ones in US.
but it's even more scary to think what's to come next,
1, let's first exam the capacity in the post-internet era on an individual base, profession to profession:
ability:
an Chinese air hostness doing very much the same job as American hostness, a Chinese pilot the same as American but may have had less hours,
software engineering, 80% of average knowledge,
productivity, the actually output rate:
I think in general, Chinese works work harder, and the lower the knowledge chain, the hard.
Chinese textile workers are probably 3 times more productive than American peers.
A typical US workers are much more able, better educated, more seasoned and experienced, but we probably produce less,
because we waste a lot of things on important things such as management meeting or web surfing.
2, look at the sum
China current have proably 500m to 700m works, US has probably 150m, which means from a development point of view,
a Chinese year may as well be 5 US year.
if you really think about, that's about right. China now has half of US's highway infrastructure, mostly developed in the last 10 years.
China citi landscapes are fast catching up and exceeding US counterparties.
3, development capacity: the extra capacity beyond maintenence
the more scary ratio is what I'd called development capacity, that part that's beyond the maintenance and repair work. US has been
in "consumer economy" for a long while, it requires a huge base for maintenance. As indicated in the crawling pace of 2% GDP growth,
the delta, the change, the increase part of the society is very little. On the other side, China grows beyond any economic measurement.
The ratio is probably more than China 10, US 1.
To a great degree, year 2006 marks the time that China solved the puzzle for wealth creation.
There are 2 major tasks going forward, looking inside, wealth distribution for inside and a balanced cohabitation with other countries for outside.
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todo 1, Chinarica, China going Americana
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the civil systems, the policies and regulations
Chinese people are not stupid, not silly,
"Yu Min" attempts from various special interest groups will be exposed more and more,
4) law, economic structure, and ways of living
2.1) tax
from the bereau,
personal tax
2.2) going republic?
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going to a true republic
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the way going to a true republic
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tax is the path,
in a modern society, tax is the way to collect society common resource,
shifting from enterprise "value-adding" tax to individual tax system, this will
gradually allievate the burden on enterprise
have great long term effect in nation's psychology, ie, people will start more to
the enterpernue side than trying to land a iron and/or glod rice bowl,
even individual tax, from specifi category based taxing model to gross income based model,
personal income, salary and investement gain
business income
property tax
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the hybird model, free selection vs planned
http://business.sohu.com/20061220/n247146913.shtml
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todo 2, Cohabitation, the initial stage for a globalized socialism
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the next of globalization: cohabitation
1, military is a red line,
2, play nice, not play mean, win-win,
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Postlude, a family reunion in the countryside
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