BRIC+ News & comments

[Workaholic]

That's an interesting article, although I disagree with one of the fundamental assumptions made by it.

while still-rigid political systems stifle free thought and hamper technical advance

I find this to be a trite and, from personal experience, untrue statement which authors like to use in articles such as this one. I have never found "still rigid political systems" to hamper innovation and technical advance (at least in the IC field where I work). The idea that democracy vs authoritarianism will, for example, hamper current research at work is ludicrous. Innovation at my company has come from RD teams from both authoritarian and democratic countries.

 

[quadraphonics]

I find this to be a trite and, from personal experience, untrue statement which authors like to use in articles such as this one. I have never found "still rigid political systems" to hamper innovation and technical advance (at least in the IC field where I work). The idea that democracy vs authoritarianism will, for example, hamper current research at work is ludicrous. Innovation at my company has come from RD teams from both authoritarian and democratic countries.

The premise is very pat, to be sure. And if it's read as implying that nobody anywhere in an authoritarian system is going to do any innovation at all, then it's obviously false. But I think the proper reading of it is more as a statement of general incentives - all else being equal, an authoritarian political culture disincentivizes innovation. That doesn't seem controversial to me.

Also I think there is something to the general observation that China (and Russia) are not exhibiting much strength in terms of driving innovation. One can easily name tons of high-global-impact innovations that emerged from the West in the past, say, 20 years (world wide web, social media, ipods, smartphones, GPS, drone aircraft, cloning, DNA sequencing, etc.). It's much harder to name even one that came out of China or Russia or any other authoritarian state (even the economically vibrant ones). China in particular has exhibited ruthless pursuit of manufacturing competitiveness and technology adoption, but has yet to make much of a dent in terms of innovation.

 

[Workaholic]

The premise is very pat, to be sure. And if it's read as implying that nobody anywhere in an authoritarian system is going to do any innovation at all, then it's obviously false. But I think the proper reading of it is more as a statement of general incentives - all else being equal, an authoritarian political culture disincentivizes innovation. That doesn't seem controversial to me.

Also I think there is something to the general observation that China (and Russia) are not exhibiting much strength in terms of driving innovation. One can easily name tons of high-global-impact innovations that emerged from the West in the past, say, 20 years (world wide web, social media, ipods, smartphones, GPS, drone aircraft, cloning, DNA sequencing, etc.). It's much harder to name even one that came out of China or Russia or any other authoritarian state (even the economically vibrant ones). China in particular has exhibited ruthless pursuit of manufacturing competitiveness and technology adoption, but has yet to make much of a dent in terms of innovation.

Yeah, the thing is I'm coming from my own limited personal experience which obviously doesn't reflect the whole picture so to speak.

Coincidentally, I happen to work in one of the fields you listed : smartphones. Our company designs turn key cell phone solutions and a rather large portion of the market uses our ICs, but most people have never heard of it. End users only hear about Apple, Samsung, HTC, etc, but rarely understand what actually goes on "behind the scenes" and where the technology they are using was actually designed and tested.

Innovation at these places happens in hundreds and thousands of small steps. For example, someone designs an alogrithm to handle decoding a H.264 video stream using limited resources available in a phone and applies for a company patent. Things of this nature are common.

Having said that, for the past few years (~5 or so) I have seen little difference in the quantity and quality of innovation coming from various RD centers (we have RD throughout Asia including China as well as the US and UK). Generally, political systems have no affect at all on any of this.* Innovation is coming from all sides and it would be wrong to give credit to a single branch for a successful project.

Of course, again, this only applies to my current situation and may not apply to the overall case.

*There is only 1 case where politics affects RD and it is in the transfer of technology. Generally the US seems most strict about transferring RD to Asia (China in particular) and we have to jump through some hoops to get things done. This, of course, is a pain in the ass has a negative effect on work efficiency.

 

[Billy T]

I tend to agree with Workaholic more than Quad, who I think is over generalizing here:

The premise is very pat, to be sure. ... I think the proper reading of it is more as a statement of general incentives - all else being equal, an authoritarian political culture disincentivizes innovation. ...

Also I think there is something to the general observation that China (and Russia) are not exhibiting much strength in terms of driving innovation. ... It's much harder to name even one that came out of China or Russia or any other authoritarian state (even the economically vibrant ones). China in particular has exhibited ruthless pursuit of manufacturing competitiveness and technology adoption, but has yet to make much of a dent in terms of innovation.

The difference, I think, is mainly that centrally planned* economies can FOCUS their innovation efforts better than free market like democracies can. Also, historically they do produce better educated masses in the fields needed (math & sciences) for innovation than democracies do. This too is a result of their control / focus - You will look long and hard to find "music appreciation" courses in Russian or Chinese universities, but almost all US universities have or something like it offered.

Thus it was the USSR, not the US, that put the first Earth orbiting satellite up, made great advances in their army's guns (AK-47) as contrasted with the often jamming and heavier M-1, etc. and the US which made more advances in consumer products, like DVDs, microwave ovens, etc.

Even what you say about China is not true. For example:

"... "China is a vaccine-producing power" with more than 30 companies that have an annual production capacity of nearly 1 billion doses — the largest in the world, the country's State Food and Drug Administration told The Associated Press. ...

China's vaccine-making prowess captured world attention in 2009 when one of its companies developed the first effective vaccine against swine flu — in just 87 days — as the new virus swept the globe. ...

Then, this past March the World Health Organization announced that China's drug safety authority meets international standards for vaccine regulation. ..."

From: AP as copied at: http://news.yahoo.com/china-prepares-big-entry-vaccine-market-072555312.html ...

In workaholics field, cell phones China offers a huge variety - one even has a refillable liquid chamber with spray pump ladies can use when they want to apply some perfume or breath freshener.

Innovation comes from good science and math education, more than from profit motives, especially now that the profits go to the employing corporation, not the inventor.

You might want to consider this recent (published less than three days ago) NYTimes article, called:
"Power in Numbers: China Aims for High-Tech Primacy"

Which in one of the areas it discusses states:
"... China already has almost twice the number of Internet users as in the United States, and Dr. Wu, a computer scientist and director of the Chinese Educational and Research Network, points out that his nation is moving more quickly than any other in the world to deploy the new protocol.

IPv6 — Internet Protocol version 6 — offers advanced security and privacy options, but more important, many more I.P. addresses, whose supply on the present Internet (IPv4) is almost exhausted. “China must move to IPv6,” Dr. Wu said. “In the U.S., some people don’t believe it’s urgent, but we believe it’s urgent.”

If the future of the Internet is already in China, is the future of computing there as well? Many experts in the United States say it could very well be. ..."

Read it all here: http://www.nytimes.com/2011/12/06/science/china-scrambles-for-high-tech-dominance.html?a=5

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*I prefer that instead of biased "authoritarian political culture" or "authoritarian state" contrasted with "political openness" of democracies, etc. when discussing technical innovation (but not of course if we were discussing political freedoms)

 

[Billy T]

... In China and Russia, demographic patterns have shifted. Their working-age populations are declining, as are exports, while still-rigid political systems stifle free thought and hamper technical advance. Future trends still look robust in Brazil and India,....

This is based on the idea that continued growth in populations is good – leads to greater economic prosperity and that has certainly been true, looking backwards.

I am not so sure it still is true looking to the future in an era of increasingly costly natural resources. I think it was true as the cost of natural resources has decreased in terms of man – hours needed to produce them for more than a century. In ten years China’s demand for gasoline for cars will double – It would more than double, if China did not have the “one child” rule in effect for more than a decade.

Also there has been great increase in production per man hour worked. (Part of the US’s jobs / unemployment problem) This will continue, even in China. For example, Foxconn, world’s largest maker of electronic products for consumers currently has 10,000 production line robots, but has ordered 1,000,000 more!

Russia is already with a decreasing population living longer. China will be that by about ~2040. They will need less raw materials, less energy than India with it then larger population than China has.

World is entering a new era, where what was true is now false. I.e. if you want a high living standard for your population you must stop expanding it. – You will not have that desirable future with many robots and many jobless growing populations. The rules of the game have changed

Summary: Your looking to the past and assuming what was best then is a false approach for the future with robots and limited more costly resources. Look to the future, not the past.

 

[quadraphonics]

Coincidentally, I happen to work in one of the fields you listed : smartphones. Our company designs turn key cell phone solutions and a rather large portion of the market uses our ICs, but most people have never heard of it. End users only hear about Apple, Samsung, HTC, etc, but rarely understand what actually goes on "behind the scenes" and where the technology they are using was actually designed and tested.

Interesting - does the name of your employer start with the letter "Q?"

Having said that, for the past few years (~5 or so) I have seen little difference in the quantity and quality of innovation coming from various RD centers (we have RD throughout Asia including China as well as the US and UK). Generally, political systems have no affect at all on any of this.* Innovation is coming from all sides and it would be wrong to give credit to a single branch for a successful project.

Ah, but you're talking about foreign branches of a US (Western?) company. The multinationalization of R&D complicates the issue - those US R&D centers in China are not subject to the set of cultural incentives that a "home-made" Chinese company would be. They are more like incubators set up abroad, answering to the incentives of the US culture. The profits accrued from said innovation go to the US company, not to China, so they don't really figure into this accounting of growth prospects in China, directly.

But more broadly, the incentives stemming from political culture are more top-level issues, which may not be particularly visible down where the rubber meets the road in all cases. I.e., in an authoritarian political culture, a company's position depends as much on political connections and favor as it does on output quality. So if a new, upstart firm comes along - these being a major systemic contributor to innovation, since they aren't invested in old ways of doing things, and in fact need to invent new ones to differentiate and gain leverage - they face a steep uphill battle on political grounds. Likewise, established companies which fail to innovate are shielded from the negative consequences. None of that implies that established companies won't try to innovate - rather, that they don't need to try as hard, and can squash competitors who do innovate on political grounds. So you end up with less innovation (not zero).

 

[quadraphonics]

The difference, I think, is mainly that centrally planned* economies can FOCUS their innovation efforts better than free market like democracies can.

They can certainly pour a lot of resources in, but that isn't necessarily "better." You have to assume that the central planners are infinitely wise and can see the future, and so manage to allocate resources more effectively than the free market. This is essentially never the case over any time scale, or across any large set of sectors.

Also, historically they do produce better educated masses in the fields needed (math & sciences) for innovation than democracies do.

Fields like business, management and law are all crucial to innovation, in the sense of business innovation contributing to GDP growth relevant here. It doesn't matter how good your math and science skills are, if the corresponding business, management and law culture is risk-averse and not oriented towards producing and leveraging innovation. Which is the norm in authoritarian systems, since political connections are crucial to business success, and so rent-seeking abounds and risk-taking declines. The legal regime fails to protect intellectual property (huge disincentive to innovate) so that connected local firms can profit by stealing foreign innovations. In the meantime, many of your best and brightest engineers and scientists go abroad for challenging, innovative work (supposing they didn't go abroad to get their educations in the first place), or work at local R&D centers for foreign corporations.

This too is a result of their control / focus - You will look long and hard to find "music appreciation" courses in Russian or Chinese universities, but almost all US universities have or something like it offered.

And, probably unsurprisingly, Russian and Chinese firms are nowhere to be found in the list of innovations in music coding and processing. Well, there's a few Chinese firms, but they're very minor players.

Thus it was the USSR, not the US, that put the first Earth orbiting satellite up, made great advances in their army's guns (AK-47) as contrasted with the often jamming and heavier M-1, etc. and the US which made more advances in consumer products, like DVDs, microwave ovens, etc.

Note that the USA ended up with an armed forces and space program that is far, far technologically superior to that of the USSR/Russia, in the long run. As well as superior consumer products, etc.

Nazi Germany and Imperial Japan would probably be better counterexamples, since they were both notably innovative (indeed, the early space race was more of a competition to acquire and exploit German aerospace technology and personnel, then a real contest of internal innovation).

Even what you say about China is not true. For example:In workaholics field, cell phones China offers a huge variety

Except very few of the innovations in those phones originated in China. Japan and Korea likewise have stupefyingly diverse smartphone offerings, so this is something of a reflection of the Asian consumer market in general. You seem to have missed workaholic's key observation that his employer produces turn-key solutions - when one of those Chinese firms wants to market a smarphone with whatever features, they don't sit down and invent it. They call up a company like workaholic's employer and ask them to do it for them.

Innovation comes from good science and math education, more than from profit motives, especially now that the profits go to the employing corporation, not the inventor.

You need all the components - absent a profit motive, there's no incentive for the corporation to invest in innovation. If they can make more money for less expenditure by just sitting on their current products and using political connections to squash competition, that's exactly what they'll do. The mathematicians and scientists will go where people pay them. And if that's a Western company (or a local branch of a Western company), then that's where the profits will go as well.

You might want to consider this recent (published less than three days ago) NYTimes article, called:
"Power in Numbers: China Aims for High-Tech Primacy"

From that article:

But China’s efforts at dominance are hardly without obstacles. The country has fallen far short on a decade-long commitment to build the world’s leading semiconductor industry, and it still imports a vast majority of microchips for the products it assembles. Its best chip factories are two to three generations behind world leaders like Intel, in the United States, and T.S.M.C., in Taiwan.

China’s great weakness may prove to be too much government control. Chinese innovation may also be limited by the relative lack of intellectual property protection, discouraging entrepreneurs from breaking new ground.

The 13th International Conference on Ubiquitous Computing, in Beijing in September, left American technology experts underwhelmed.

“There was nothing that really leaped out at me,” said John Seeley Brown, who directed the Xerox Palo Alto Research Center in the 1980s, when the concept was invented.

In contrast, he said, he observed true innovation at companies like Foxconn, the Taiwanese manufacturing firm with extensive operations in mainland China that has done much of Apple’s assembly work.​

I don't disagree that China's leaders like to make bold pronouncements about taking over valuable sectors. Actually doing it, especially when such would require big changes to the political status quo, is a different matter.

Which in one of the areas it discusses states:
"... China already has almost twice the number of Internet users as in the United States, "

Considering that China has almost five times the number of people as in the United States, that is maybe not so impressive. We're left with the conclusion that Americans are more than twice as likely to use the internet, as are Chinese.

and Dr. Wu, a computer scientist and director of the Chinese Educational and Research Network, points out that his nation is moving more quickly than any other in the world to deploy the new protocol. [IPv6]

That's great that they're deploying IPv6 - but that's not innovation. China was a non-entity in the actual invention and creation of IPv6. It was all done by Western corporations and institutions. China is purchasing foreign innovations here, not creating its own.

And the reason that China is in a position to rush ahead with IPv6 deployment is exactly that they don't have as much existing infrastructure as others do - internet penetration (users per capita) is at or above 80% in Western countries, but is in the low 30's in China. China pretty much has to go on a headlong deployment rush, since they have like a billion citizens with no Internet. Coming to the game late does carry the compensation that you get to start with the latest generation of stuff, but I'd hardly hold it up as evidence of technology leadership.

 

[quadraphonics]

This is based on the idea that continued growth in populations is good

No, it's based on the simple observation that workforce growth has been one driver of GDP growth in China is recent years. And that because workforce growth has now ground to a halt, it will not be driving growth going forward. The article doesn't worry much about population growth - it looks primarily at workforce growth.

Did you read the article?

I am not so sure it still is true looking to the future in an era of increasingly costly natural resources.

Indeed, and between that and China's huge population they are not so well positioned going forward. The linked article discusses exactly this. Compare to North America, which has a lot more resources and a lot fewer people.

Again, I suggest that you read the article before telling me what I'm thinking (or what the article is thinking).

 

[Billy T]

... From that article:

But China’s efforts at dominance are hardly without obstacles. The country has fallen far short on a decade-long commitment to build the world’s leading semiconductor industry, and it still imports a vast majority of microchips for the products it assembles. Its best chip factories are two to three generations behind world leaders like Intel, in the United States, and T.S.M.C., in Taiwan.

China’s great weakness may prove to be too much government control. Chinese innovation may also be limited by the relative lack of intellectual property protection, discouraging entrepreneurs from breaking new ground.

The 13th International Conference on Ubiquitous Computing, in Beijing in September, left American technology experts underwhelmed.

“There was nothing that really leaped out at me,” said John Seeley Brown, who directed the Xerox Palo Alto Research Center in the 1980s, when the concept was invented. ...​

Yes I read that in the article, but assume you read what was couple of paragraphs prior, namely:

"... Not only was it {a pentaflop computer} based on a Chinese-made microprocessor, but it also achieved a significant advance in low-power operation. That might indicate the Chinese now have a significant lead in “performance per watt” — a measure of energy-efficient computing that will prove crucial to reaching the next generation of so-called exascale supercomputers, which are computers that will be a thousand times faster than the world’s fastest today, and which are scheduled to arrive by the end of this decade. ..."

I will willing agree that China is still far behind the west in many areas, but their rate of progress is astounding - doing in a decade what the west took a century to do, etc. (And not just in technology, where imports speed the process but in social structure too: For example converting from nation 90% rural farmers to 90% not farmers living new cities, etc.)

Our fundamental difference is you repeatedly cite how the West WAS better, more advanced, etc. I tend to ignore that and look where the Chinese are now and how rapidly they are advancing.

We can revisit the question in 5 or at most 10 years to see who is the leader in more technical fields. Part of the reason why I think China will be is I expect the US will be mired in a deep long lasting depression (along with the EU). I.e. just as you observed by noting that the USSR, lost its lead in the areas it had focused on when it collapsed economically and politically, the same can happen to the US wrt China.

PS I can agree that China is 2 or 3 generations behind Intel, in the United States, and T.S.M.C., in Taiwan in some ares, but China is on generation 6 of flat screen displays, while the US could not get economic yields on generation one so gave up. Also, I tend to Taiwan as part of China, and am confident it will be withing the next decade* - again based on the current relation ship and it rate of change not the past animosity with threats of invasions, etc.

* Probably under the "One China. Two economic systems" as Hong Kong, etc. are already.​

 

[quadraphonics]

"... Not only was it {a pentaflop computer} based on a Chinese-made microprocessor, but it also achieved a significant advance in low-power operation. That might indicate the Chinese now have a significant lead in “performance per watt” — a measure of energy-efficient computing that will prove crucial to reaching the next generation of so-called exascale supercomputers,

I'm unsure where the author got the idea that that computer is a leader in performance per watt. Here's the current Green500 list (ranking of supercomputer in performance per watt):

http://www.green500.org/lists/2011/11/top/list.php

Note that China's machine is ranked 9th, behind a bunch of American and Japanese machines.

I will willing agree that China is still far behind the west in many areas, but their rate of progress is astounding - doing in a decade what the west took a century to do, etc. (And not just in technology, where imports speed the process but in social structure too: For example converting from nation 90% rural farmers to 90% not farmers living new cities, etc.)

They imported the formula for urbanization and development just as much as they imported the designs for turbines and skyscrapers and cars. Urbanization is a form of technology - including social technology.

Our fundamental difference is you repeatedly cite how the West WAS better, more advanced, etc. I tend to ignore that and look where the Chinese are now and how rapidly they are advancing.

You can keep saying that, but it won't get any more accurate, and I'll keep calling bullshit on it.

Part of the reason why I think China will be is I expect the US will be mired in a deep long lasting depression (along with the EU). I.e. just as you observed by noting that the USSR, lost its lead in the areas it had focused on when it collapsed economically and politically, the same can happen to the US wrt China.

Obviously, total economic and political collapse will be a major setback.

But that has nothing to do with anything we're talking about here (impact of political culture, labor force growth, urbaniation, etc.). Indeed, if total collapse occurs, none of that stuff will make a significant difference anyway, so it's not really germaine.

Also, I tend to Taiwan as part of China

For the issues under discussion here, that is not valid. Taiwan has a different political and business culture, different demographics (no one-child rule there) and a different urbanization sctructure.

* Probably under the "One China. Two economic systems" as Hong Kong, etc. are already.

It's been pointed out before that if one separates Hong Kong from Mainland China in one's accounting a lot of the economic statistics look drastically different. But, that was a while ago, be interesting to see what it looks like now.

Meanwhile, the Chinese trade surplus continues its decline (in absolute terms, not just relative to GDP):

http://www.reuters.com/article/2011/11/22/us-china-economy-xia-idUSTRE7AL0MK20111122

 

[Billy T]

... They imported the formula for urbanization and development just as much as they imported the designs for turbines and skyscrapers and cars. Urbanization is a form of technology - including social technology.

Totally false. The reason for the surge to urbanization in China is TOTALLY UNIQUE to China:

Farm land is still owned by the state. Until about three years ago, the farm families historically living on tiny inefficient plots could not lease it to anyone else. (Now much of it is large efficient corporate farms.) Then rules were changed (despite Communistic doctrine) as tiny farms were producing too little food for the growing urban populations.

Also the huge, perhaps excessive and certainly not sustainable for many more years, capital investments in infrastructure, (100 new cities for 1 million people each, with everything that implies from new buses to trash cans) and new faster railroads being built, etc. caused a great need for more urban workers. This, no doubt was also big factor in the trashing the traditional communistic doctrine about no private large corporate farms.

These two changes are the reason why China's population is surging into the cities. Nothing to do with importing or copying how and why the US etc. took ~100 years to go from 90% farmers to 90% urban dwellers.

The former pig farmers now have their farm lease money PLUS salaries from new jobs in the cities (both new and old), building the new cities or as railroad laborers tying China together with world's fastest trains, or in building thousands of miles of new, large diameter, gas pipelines, or new power plants (one coming on line every two weeks!), smart grids and world's fastest expansion of "green energy" facilities etc.

Their disposable REAL income is up more than 100% compared to when they were farmers. Why China no longer needs to export as much as it did. I don't mean anything derogatory with "pig farmers" - just stating the little known fact that they raised more pigs than all the rest of the world's total! (Chinese eat pork, not beef, and it takes many pigs to make one cow's weight in meat.)

Fundamentally, China's CCP had no choice: The old "export to US and EU" economic model was broken - only held up by huge annual loans from China to these buyers of China's exports. There is (and CCP knew it) danger to the CCP's control with a prospering population (especially an internet connected one). If there had been anyway the CCP could have kept the urban population under paid and slaving way, 12 hours day in "sweat shops," producing good for export and the pig framers back on their inefficient tiny farms, they would have.

...
Meanwhile, the Chinese trade surplus continues its decline (in absolute terms, not just relative to GDP):
http://www.reuters.com/article/2011/11/22/us-china-economy-xia-idUSTRE7AL0MK20111122

Yes China's TOTAL exports, as you note above, are down with China's switch to a more domestic economy taking place; HOWEVER, export to Africa are UP 14%, and to the set of about 10 SEATO countries*, exports are UP on last year alone more than 50%! I.e.China will continue to be one of the world's largest (probably THE largest) exporter, even when very little goes to depressed US & EU. (For example, Brazil now imports more Chinese made cars than US made cars and less than three years ago imported NONE from China!)

As you know, I predicted exactly these changes several years ago. Again, the CCP had no choice. They and I knew some years ago that the US and EU were broke. That Brazil would become an "economic colony" of Asia. etc. I could predict all this, and that the CCP would change their economic model, as I look to the trends, not the past, to predict the future.

-------------
*Quite possibly the changes now taking place in Mymar (Burma) are due to the large and growing trade with China. Hillary Clinton, US Sec. of State, went there last week, not to help the Burmese people get a more democratic state, as US's spin masters tell it, but to try to keep that energy and mineral rich country from becoming an "economic colony" of China. India is probably equally worried about this was most (I think) of their natural gas comes from Burma.

 

[quadraphonics]

Totally false. The reason for the surge to urbanization in China is TOTALLY UNIQUE to China:

In the first place, I didn't say anything about "the reason" in the material you are responding to.

In the second place, "the reason" for urbanization in China is exactly the same as anywhere: the cities offer high-paid, more productive jobs along with an increased standard of living. The arcane land-title issues have had an effect in the speed of the urbanization once it got underway, to be sure, but this is basically just another iteration of the same development patterns that all developed countries have gone through. China, being the latest to do so, has access to all of the innovations in urban planning, construction, etc. that came out of other countries' experience.

Their disposable REAL income is up more than 100% compared to when they were farmers. Why China no longer needs to export as much as it did.

China may or may not "need" to export at whatever level, but the point was that exports have been a driver of growth in recent years, but appear set not to contribute much to growth in coming years. So that's another of the legs that China's been walking on - which earned them their place in the BRIC term - that's been sawed off (along with workforce growth).

Fundamentally, China's CCP had no choice: The old "export to US and EU" economic model was broken - only held up by huge annual loans from China to these buyers of China's exports.

"Held up?" That export model was created by huge loans to the export markets. That's exactly how you go about implementing exchange rate controls.

The basic premise of it was always that per-capita income was much higher in the West than in China. Still is, in fact, just not to the degree it used to be, and meanwhile there's a big downturn in demand lately.

Yes China's TOTAL exports, as you note above, are down

Apparently you did not read the linked article. It clearly states that China's exports are still growing - just not nearly as quickly as China's imports. Africa is never going to replace export markets like the EU or USA. The amount of money the USA spends on imports each year, is larger than the entire GDP of Africa.

I.e.China will continue to be one of the world's largest (probably THE largest) exporter,

Likewise, the USA will continue to be one of the world's largest exporters (currently roughly tied with Germany for #2 behind China). And like the USA, China will cease to exhibit a trade surplus - not because exports will decline (in absolute terms), but because imports will catch and even outstrip them.

 

[Billy T]

".. Dec. 9 (Bloomberg) -- The Vale Beijing, the iron-ore carrier damaged while loading its first cargo in Brazil, {10 times larger than the Titanic - see photo in post 479} ... must be moved for a second time so divers can determine the leak’s size and type, ... STX Pan Ocean Co., located in Seoul, owns the ship and is leasing it to Rio de Janeiro-based Vale SA, the world’s biggest iron-ore producer. ...

Vale is spending more than $8 billion on the fleet to lower freight costs to China, its fastest-growing market in Asia. The country is the world’s largest steel producer, ... Vale referred calls to STX Pan Ocean. Sean Park, a spokesman for the South Korean company, declined to comment from Rio de Janeiro.

The ship has a cracked ballast tank, an area between cargo holds and the hull that is filled with water when vessels are empty to keep them stable, STX Pan Ocean said in a prior statement. The carrier can be repaired and continue operating, the company said, adding it’s too soon to assess the cause of the incident. ...

The leak started as the Vale Beijing, able to carry 400,000 metric tons of iron ore, had loaded 260,000 tons ... The design of Vale Beijing, built by Jinhae, South Korea- based STX Offshore & Shipbuilding Co., differs from the other five vessels in service, which were constructed elsewhere,. ... {These six new ships are each more than twice as large as prior ore carriers.}

China was the destination for 45 percent of Vale’s ore in the third quarter. ... "

Billy T: As I commented earlier this huge cost* will keep lawyers well paid for years as STX will claim Vale improperly loaded it and Vale with deny that and claim the unique design and / or construction caused the crack, first time it was ever loaded. That Vale has loaded many other ships which could have been damaged if not for Vale's careful loading procedures, etc.

*Cargo alone is worth 50 million dollars and undelivered is loss of earning for Vale. I don't know cost of ship, but guess about a billion dollars. You could live 40 years in luxury retirement on the interest cost of one day being lost now every day!

Read more at: http://www.businessweek.com/news/20...-carrier-has-external-leak-surveyor-says.html

 

[Billy T]

“…Housing prices in China have tended to be reasonable, with flat prices in first-tier cities such as Beijing and Shanghai during the past year. Meanwhile, prices in small and medium-sized cities - which experienced sharp increases between the end of 2010 and the second quarter of this year - have begun to fall. …

{Some who paid more a few months ago are not happy with the price reductions - see post 474. They are still far from "underwater" like ~1/4 of Americans are who also paid much more a couple of years ago because in China at least 30% down payment is the typical requirement and many saved for years (Yuan is rising in value at least wrt dollar) and then paid cash.}

China's housing market is expected to achieve a soft landing due to effects that emerged from the government's strict limits on property purchases, according to a report : The Annual Report on the Development of the Housing Market in China (2010-2011), released by the Chinese Academy of Social Sciences, {which} said the dramatic trend of rising housing prices had been curbed, with declines in both housing prices and sales. … “ From: http://usa.chinadaily.com.cn/business/2011-12/10/content_14243989.htm
------------
“ … {China’s } price index (CPI), a main gauge of inflation, dropped sharply in November to a 14-month low of 4.2 percent, from 5.5 percent in October, after hitting a 37-month high of 6.5 percent in July, according to data posted on the website of the National Bureau of Statistics (NBS) on Friday. …

The expectation of even lower inflation next year, about 4 percent year-on-year, may leave more space for policymakers to shift their priority from reining in rising prices to stimulating economic growth, analysts said. … “ From: http://usa.chinadaily.com.cn/business/2011-12/10/content_14243948.htm

 

[Billy T]

China’s military response to Hillary’s C. visit to Myanmar/ Burma and river pirates who have been active on the Mekong for many years, killing more than 100 merchant sailors in last decade. But Hillary’s visit, & US efforts to strengthen US Burma ties (“sell democracy”) is main reason IMO why now China is doing something about this NOW. Also significant part of “why now,” IMO, is fact China is switching to trade more with its now prospering Asian neighbors and less with the US and EU, who need loans to buy Chinese products. (Chinese trade with these four Mekong countries is up more than 50% over last year.) The Mekong is an “international waterway” up to the Chinese border.

The Mekong flows east and south into Laos for some 400 kilometres (250 mi) and defines the Laos-Thailand border again for some 850 kilometres (530 mi) as it flows east, turning south through central Southeast Asia, passing through the capital of Laos, Vientiane. The Mun River's confluence with the Mekong occurs right before it crosses into Cambodia, where it receives the Sap River, flowing by Phnom Penh, the capital of Cambodia. The Mekong slows as it enters Vietnam, where it divides into nine channels of the Mekong Delta . (From Wiki)

See larger images and another here: http://www.washingtonpost.com/world...gin-saturday/2011/12/09/gIQAVhgJhO_story.html
Patrols use both high speed small boats (first photo) and large vessels (Chinese men, with guns, are standing on side of one in 2nd photo)

"... The joint operations among the four nations will take Chinese vessels downstream over the border, a first for Chinese border police.* China has long contributed police to United Nations peacekeeping missions overseas, but this is believed to be the first time they will work in another country’s territory without a U.N. mandate.
The patrols reflect how Chinese political influence is accompanying the country’s economic penetration of the region, particularly in the impoverished nations of Laos and Myanmar. ..." Quote from same Washington post link above. Yesterday Aljazeera/English put up this interesting video: http://www.youtube.com/watch?v=CJfui1xKDZ4 Which show the large patrol boat of the 2nd small photo and many others in operation.
* Old Chinese saying (I just made up): "When you invite the dragon into your house, you may lose it."
An oil pipeline between Bay of Bengal and Meykong across Burma would greatly reduce oil transport costs for China getting Iran's etc oil AND avoid the need for ocean tankers to pass thur St. of Malacca, which the British blocked with their large Naval base at Singapore, cutting off Japanese oil supplies, and causing WWII. Royal Navy intelligence had assured the government that the Japanese could not take Singapore, but they were wrong. - Japan did and thousands of Brits were forced to flee north into the Jungle. The US assembled an “invincible armada,” the entire Pacific fleet, at Pearl Harbor to go save these Brits and reclose the straight – you know the rest of the story, but it is rarely truthfully told by WWII's victors.

 

[Billy T]

"... staff members working in state administrative organs in Guangdong province will now be issued with a contract of employment instead of a lifetime guarantee, xinhuanet.com reported Tuesday.
The new system will break the decades long "iron rice bowl" which used to mean a guaranteed job for life in government, and civil servants in the province will be paid according to their performance. ..."
from: http://usa.chinadaily.com.cn/china/2011-12/06/content_14221892.htm

Good news for China. Now if only US CEO's bonuses were tied to their performance US would be making real progress.

 

[Billy T]

Although China has limited the top speed on some high speed tracks, it is still advancing the state of the art in high speed trains.

This one can exceed almost all small airplanes: >500Kmh with its 22,800 kilowatts electric motors. Contrast that with the 9,600 kilowatts used in the trains now in service on the Beijing-Shanghai High-Speed Railway, which hold the world speed record: 300 km per hour.

That is 30,563 Horse Power.
If image not showing go here: http://usa.chinadaily.com.cn/china/2011-12/26/content_14330677.htm (China daily often only permits upload of images for a few days.) Also right clicking on image place holder and selecting "open in new page" often works or just try again the link. It is worth some effort to see the very aerodynamic engine's long sloped front (about 40 foot long slope I would guess to hold wheels on the track with high pressure for traction friction)

The maximum total thrust horsepower developed by BOTH the General Electric CF6-80C2B2 Gas Turbofan Jet Engines that power the Boeing 767-300ER airplane is 42,948HP. I.e. this train’s engines deliver more traction HP by 6% than either of the Boeing 767-300ER’s engines delivers thrust to the air. (At flight altitude about 2/3 of the jet engine's power is used up driving the air compressor but up there the air drag is less too.)
Read more: http://wiki.answers.com/Q/What_is_the_horsepower_in_a_Jet_engine_on_a_767#ixzz1hdzqk39B

 

[S.A.M.]

Billy T:

Brazil has overtaken the UK as the world's sixth largest economy, an economic research group has said.

The Centre for Economics and Business Research (CEBR) said its latest World Economic League Table showed Asian countries moving up and European countries falling back.

The CEBR also predicted that the UK economy would overtake France by 2016.

It also said the eurozone economy would shrink 0.6% in 2012 "if the euro problem is solved", or 2% if it is not.

http://www.bbc.co.uk/news/business-16332115

 

[Billy T]

Billy T:

Thanks for predicted good news on Brazil, but here is more, and stronger:

"... Rudy Martin, Emerging Market Winners:

Brazil has about 50 million acres of arable land*, a young population of over nearly 200 million, and a $2 trillion GDP.

Before the president's term is over, it's poised to overtake France, Britain and Germany. And if Europe's future is as dire as our team believes, it could happen even sooner.

And it suffers from few — if any — of the debt diseases that afflict the developed world. ... "

From: http://www.moneyandmarkets.com/our-best-collective-wisdom-on-the-big-picture-48583

Surpassing Germany, which exports more than the US does (is second only to China) would be amazing, if done that quickly. I.e. they are expecting more of a collapse in EU and quicker than I do. Brazil does trade mainly with China now, so I guess it is possible. Stocks in Brazil are down. Not because Brazil has serious problems, but because others do who have invested in Brazil and now need to cover their debts etc.

*And much of it not used for agriculture plus about 20% of the world's fresh water if the ice in Antarctica etc. is not counted. (I.e. counting only liquid H2O)

 

[Billy T]

Despite the shrinking "middle class" in the US, between 50 & 100 million people are joining the "middle class" globally each year, most of them in one of the BRICs. The exact number depends upon how you define "middle class."

They will need more minerals, more and higher protein content food, and especially more energy. When one does not select a "middle class" subset of the population, but considers nations total demand the range of predicted demand growth narrows. For example, oil needs in the US will decrease nearly 10% in the next decade (That is even without the depression I predict the US will be in by late 2015 or sooner); but China's oil demand will increase by at least 40%. I have not seen many estimates of the increase in oil demand for India in the next decade, but suspect it too averages about a 40% increase.

One non-debt factor which can reduce all these predictions and trigger a global depression (China included) is the closing of the St. of Hormuz. Iran's current 10 day exercise there is surely for training - coordination of their small subs and helicopters with surface ships, but I bet they are also dropping a lot of scrap iron piece over the sides from surface ships. Half of an old hot water tank looks much like a sea bottom mine. Can tie up mine removal ship more than a day. It will be very hard to find and neutralize even only one submarine's load of mines if dispersed in field of 5000 pieces of scarp iron. Iran has at least 20 small mine laying subs* plus a large number of Chinese "silk worm" cruise missiles and only one hitting an oil tanker sends it to the bottom.

* Three more of the small sub class first launched in 2009 and 100% Iranian made, were launched less than a month ago. See: http://www.upi.com/Top_News/World-N...marines-join-Iranian-navy/UPI-56601322345136/ And also reported in the CNN link at post end.
Here are a pair of them (note the third in the background):

And Ahmadinejad ending inspection of one.

Israel is quite concerned as the new Military government in Egypt (and of course the Muslim Brotherhood should they become the government) is no longer hostile to Iran. Probably will allow two Iranian warships to pass thru the Suez Canal as Iran has recently requested and several of the small subs also. They can operate in international waters of the Mediterranean Sea off the coast of Israel. See more discussion of this new threat to Israel at: http://www.ynetnews.com/articles/0,7340,L-4079563,00.html

Iran also has quite a few of the soviet made Kilo Class subs. Iran can easily (compared to building an atomic bomb) put a large number of very sophisticated* mines in the straight. - It is only 4 miles wide and the channel deep enough for a large loaded oil tanker is less than one mile wide at points. Two tankers sunk by mines can block the the straight for months, cutting off 1/3 of the world's oil supply. The US naval force in the gulf is now less than half as large as it was when the US had bases in Saudi Arabia. In fact more than half of the entire US Navy is tied up in port for economic reasons. The most serious error in war is to over estimate your own capacity and underestimate that of your enemy, especially common if the war is on his doorstep and the other side of the world for you, far from significant supply bases.

I think the missile of photo below is a scaled down Iranian copy of a Chinese silk worm missile - not much of a threat to US warship but an oil tanker is easily sent to the bottom with one. As I recall, this missile is considerable smaller than a silk worm. They have more than 20 mile range - could be fired from hiding in an inland garage but range would be less for this one. Not important as it probably was scaled down to be able to launch from a just surfaced small sub.
* Much harder to detect or falsely trip / trigger now than the one which 23 years ago nearly sank US warship USS Samuel B. Roberts back in 1988 war with Iraq's shipping.

More discussion at:

http://edition.cnn.com/2011/12/28/world/meast/iran-hormuz/index.html?hpt=hp_c2
I'm not sure, but if you look closely at the two subs of photo above you will see on the front mid-line of the flat deck what appears to be a launch carriage guide rail for above missile that is at least as long as the truck's guide rail. That strange, short post on the very front mid-line is probably to stop / detach the launch carriage from then air born missile as well as for mooring in port.

PS the wire rod frame you see above the missile launch flame is for a canvas cover to make truck look like 40,000 others until just minutes before launch. Only reason I can think of for the plastic bags over the tires is perhaps the hot exhaust gas can attack them. Does anyone have a better idea? Truck cab has been covered with metal sheets to protect window glass - exhaust also is probably toxic to launch crew.