Quotulatiousness

December 18, 2010

Unwelcome discoveries in China’s past

Filed under: China, History, Science — Tags: , — Nicholas @ 12:38

Strategy Page looks at some recent archaeological and DNA study results that are not popular with China’s government:

Chinese scientists, conducting genetic research in western China, recently tested the people in an ancient, and remote, village, and found that the DNA of the villagers was 56 percent Caucasian (Indo-European). The current theory is that these people are descendants of Roman soldiers who were long rumored to have established an outpost on this eastern end of the ancient Silk Road (the caravan route from China to the Middle East.) The Chinese are not happy with findings like this.

The Chinese government has long been uneasy about archeologists and anthropologists finding evidence of European peoples living, and settling, in western China thousands of years ago. The Chinese have a high opinion of themselves (often justified), but because of the European role in humiliating China in the 18th and 19th centuries, they are uncomfortable with the idea that the damn Europeans have been in their neighborhood even earlier. Earlier discoveries included very old (more than 3,000 years ago) burial sites containing tall, blonde, warriors. There was also a village of ancient Jews in western China, where the people had only stopped practicing Jewish religious rituals in the last century.

[. . .]

The Chinese may be unhappy simply because they have to give the “northern barbarians” credit for driving the Indo-Aryan tribes away, rather than letting Chinese soldiers do it. Thus it’s currently a big deal in China anytime Chinese technology, or diplomats, beats the Westerners. In the Chinese universe, it’s the supreme insult for foreigners to best the Chinese, militarily or otherwise. But for the last few centuries, that is what happened. China isn’t really looking for a war with the West, but politicians find it easy to win approval by playing up the might of the motherland, and what China can do (in theory) if anyone messes with us. That process induces some amnesia about what has really happened in the past, but that’s what nationalism and demagoguery are all about.

The fascinating economics of Chinese manufacturing

Filed under: China, Economics, Tools, Woodworking — Tags: , — Nicholas @ 11:17

An interesting post at the Bridge City Tools blog about how Americans (and Canadians) are actually willing to pay the outrageous price of $5 for a single 1/8″ drill bit:

About 10 years ago I was in an OEM Chinese factory that made bench grinders. You have seen them, 1/2 HP motor, two 6” grinding wheels, pig tail cord, a small plastic face shield and no nameplate — these would be attached by the American companies that bought them. The total cost per grinder, landed in the US was $7.15. Of course at this price it would be asking too much for a UL tag.

These grinders were, and still are being sold here and the prices range from $49 to $200 — awesome margins by any standard.

Behind the factory floor there was a small mountain of insulated wire that had been pulled from old cars, appliances, televisions and the like and it was replenished daily. Surrounding the wire mountain were a couple of dozen women who were stripping the wire of insulation. These wire remnants were then spliced together and used in the grinder motor windings. Completely illegal, and dangerous. But cheap.

I thought I was shocked until I walked into the factory section that made twist drill bits. Here they were making, for the AMERICAN MARKET, those 59, 89, 119 pc drill sets found at the box stores and other discount joints for $19.95. Again, there were rows of women who were dipping the bits in what looked like Easter egg dye.

I asked the interpreter what they were doing. He replied, “They are making all the bits the same color as these four.” The four bits he pointed out were the 1/8”, 1/4”, 3/8” and the 1/2”.

I asked why.

I learned that those four bits were properly hardened. The remaining 115 bits were made with what I call pot metal. The reason?

“Because those are the only four hole sizes that Americans use.”

I asked, as politely as I could, if there was any guilt or remorse for duping their American customers. The reply was shocking.

“In America, if it cost less than $20, nobody complains about quality — everybody in China knows this.”

It’s an interesting explanation . . . and has the ring of truth to it: I’ve got several sets of drill bits, most of them bought from a reputable source (Lee Valley Tools), but I have one “big” set bought from a big box store (I think it’s branded as DeWalt, but probably made in China).

Most of the sizes of drill I use in woodworking are from the Lee Valley sets, but I think I’ve only used the 1/16″ and 1/8″ bits from the big box set. I wonder what’d happen if I tested all the rest of that set?

I have to admit being guilty of this:

More recently, I found myself at the local paint shop to purchase a Purdy paint brush — I have always liked them. So when I walked into the store I asked the sales rep to show me the most expensive brushes…

“I don’t get asked that very often…” he replied.

I then learned that the cheapest brushes outsell the flagged end bristle brushes by about 20 to one. The reason?

So people can throw them away rather than clean them.

In my defence, I can say that I get several uses from each of the “disposable” brushes because I do clean them after each use, but I do eventually throw them away. Once the quality of the applied stain or finish starts getting worse, it’s time to get rid of the brush.

December 7, 2010

Chinese official acknowledged that official data is unreliable

Filed under: Bureaucracy, China, Economics, Railways — Tags: , , , , — Nicholas @ 07:32

I’ve been saying this for years now: China’s official GDP and associated economic numbers are just not reliable:

A senior Chinese official said in 2007 that much of the country’s local economic data are unreliable, according to a leaked diplomatic cable published by the WikiLeaks website.

The official, Li Keqiang, was at the time Communist Party secretary of the northeastern province of Liaoning, and has since been promoted to vice premier. Since landing that position, he has overseen many of the central government’s efforts to improve the quality of its economic statistics, which continue to face many questions over their accuracy and consistency.

[. . .]

China’s Foreign Ministry has said it will not comment on the content of the diplomatic cables published by WikiLeaks. The leaked cable reports comments Mr. Li made in a dinner in Beijing with then-U.S. Ambassador Clark Randt on March 12, 2007. His remarks focused on the challenges of administering the province of Liaoning, which because of its legacy of failed state-owned enterprises was burdened with a large number of unemployed workers.

“When evaluating Liaoning’s economy, he focuses on three figures: 1) electricity consumption, which was up 10% in Liaoning last year; 2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and 3) amount of loans disbursed, which also tends to be accurate given the interest fees charged,” the cable says.

“By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are ‘for reference only,’ he said smiling,” the cable reads. “GDP figures are ‘man-made’ and therefore unreliable,” the cable paraphrases Mr. Li as saying.

As I said back in February, the reason for the made up numbers is inherent in the Chinese system:

In this way, the PLA stopped being just the customer/end user. They cut out the middleman and absorbed the entire supply chain. The PLA became a significant economic player in the Chinese industrial economy . . . and this is still true today. The generals aren’t formally in charge, but they own the companies that do military production.

So what? So let’s look at how a civilian corporation’s incentives differ from one owned directly by the army. In a civilian corporation, the CEO runs the business with an eye to generating the largest profit possible while staying (for the most part) within the law. A CEO who deviates from this to ride a favourite hobby horse will eventually face the wrath of the stockholders who want that maximized profit. There are natural limits on how much freedom to invest in uneconomic activity any CEO will be given. Sensible stockholders don’t try to micromanage the firm, but do raise questions if too much of the company’s efforts are devoted to things clearly not related to the company’s long term benefit. Company accounts can be rigged, for a time, to show misleading results, but eventually (Enron, Worldcom, etc.) the truth will out.

A Chinese firm that’s owned by the army? Profit may be nice, but the “CEO” reports to a different master: the guys with the guns. The company accounts will show exactly what the guys with the guns want them to show . . . and the oversight and auditing committee members carry submachine guns. You’re told that your target is 10% growth? Don’t you think that the reported result will be at least 10%? Because your life may depend on the reported results being acceptable.

As my former virtual landlord says, this is one of my hobbyhorses:

December 4, 2010

Looking for the remains of Zheng He’s treasure fleet

Filed under: Africa, China, History — Tags: , , , , — Nicholas @ 12:22

Virginia Postrel looks at the latest archaeological expedition in the Indian Ocean:

A team of Chinese archeologists arrived in Kenya last week, headed for waters surrounding the Lamu archipelago on the country’s northern coast. They hadn’t made the trip to study local history. They came to recover a lost Chinese past.

In the early 1400s, nearly a century before Vasco da Gama reached eastern Africa, Chinese records say that the great admiral Zheng He took his vast fleet of treasure ships as far as Kenya’s northern Swahili coast. Zheng visited the Sultan of Malindi, the most powerful local ruler, and brought back exotic gifts, including a giraffe. “Africa was China’s El Dorado — the land of rare and precious things, mysterious and unfathomable,” writes Louise Levathes in her 1994 history of Zheng’s voyages, “When China Ruled the Seas.”

Now the Chinese government is funding a three-year, $3 million project, in cooperation with the National Museums of Kenya, to find and analyze evidence of Zheng’s visits. The underwater search for shipwrecks follows a dig last summer in the village of Mambrui that unearthed a rare coin carried only by emissaries of the Chinese emperor, as well as a large fragment of a green-glazed porcelain bowl whose fine workmanship befits an imperial envoy. Although Ming-era porcelains are nothing new in Mambrui — Chinese porcelains fill the local museum and decorate a centuries-old tomb — the latest finds suggest that the wares came not through Arab merchants but directly from China.

China’s brief dabbling in overseas exploration ended fairly suddenly, but there was no technical reason that they could not have continued. It would be a very different world indeed if the Emperor hadn’t decided to ignore everything outside the Middle Kingdom.

The real problem with contemporary China’s version of the Zheng He story is that it omits the ending. In the century after Zheng’s death in 1433, emperors cut back on shipbuilding and exploration. When private merchants replaced the old tribute trade, the central authorities banned those ships as well. Building a ship with more than two masts became a crime punishable by death. Going to sea in a multimasted ship, even to trade, was also forbidden. Zheng’s logs were hidden or destroyed, lest they encourage future expeditions. To the Confucians who controlled the court, writes Ms. Levathes, “a desire for contact with the outside world meant that China itself needed something from abroad and was therefore not strong and self-sufficient.”

November 25, 2010

Even China may not be able to afford their High Speed Rail network

Filed under: China, Economics, Japan, Railways, Technology — Tags: , — Nicholas @ 00:24

By way of Hit and Run, a brief note of caution about the headlong pace of construction of China’s High Speed Rail:

The Chinese Academy of Sciences (CAS) reported to the State Council recently, urging the large-scale high-speed railway construction projects in China to be re-evaluated. The CAS worries that China may not be able to afford such a large-scale construction of high-speed rail, and such a large scale high-speed rail network may not be practical.

[. . .] Under the current plan, the central government has approved to build, by 2020, 16,000 km of high speed rail providing access to about 90% of the Chinese population.

[. . .]

The report submitted by the Chinese Academy of Sciences said China’s high-speed rail construction has caused debt that has already reached unsustainable levels; particularly since the end of 2008, the government introduced a stimulus plan to fight the global economic crisis and the size of local government borrowing is already very high

As Ronald Bailey points out, China is now occupying the same position in American thoughts that Japan did thirty years ago — the economic juggernaut that is poised to crush weak and defenceless American business. The recent gushing about how wonderful China’s HSR system is and how America should build one too are really just echoes of the 1980’s lament on how Japan’s economic model worked so much better than messy US mixed-market capitalism.

Back in the 1980s, I was a producer for a national weekly PBS foreign policy show called American Interests. We ran a lot of nifty programs on various aspects of the Cold War. Another abiding obsession of the chattering classes was the coming triumph of Japan Inc. over a hapless America. We regularly broadcast shows featuring the likes of Robert Reich, Chalmers Johnson (see H&R obit from yesterday), and Clyde Prestowitz predicting that the wise bureaucrats at the helm of Japan’s Ministry of International Trade and Industry deftly deploying their industrial policy jujitsu would soon bury us Yanks. As evidence, critics of undirected American capitalism pointed out that Japan’s economy was growing at 6 to 8 percent per year. Japan was exporting its way to prosperity and the U.S. was running a huge trade deficit with the East Asian powerhouse. Japan could do no wrong and America could do no right. Then the Japanese bubble burst.

Twenty years later, the new meme of would-be industrial policy mavens is China Inc. Promoters include Thomas Friedman and Clyde Prestowitz. China is growing at a blistering pace of 10 percent per year and exporting its way to prosperity. Once again, we are told that East Asian capitalism directed from the top by wise bureaucrats is going to outcompete the United States and toss us into the dustbin of histoy.

November 24, 2010

China’s first aircraft carrier approaching completion?

Filed under: China, Military — Tags: , — Nicholas @ 08:08

In their growth from a small coastal protection flotilla to a blue water navy, the next milestone for China’s navy will be the completion of the Shi Lang:

Work is picking up on what appears to be China’s first aircraft carrier, the Shi Lang. For eight years now, China has been tinkering with a half finished Russian aircraft carrier. Two years ago, this ex-Russian aircraft carrier, Varyag, was renamed the Shi Lang (after the Chinese general who took possession of Taiwan in 1681, the first time China ever paid any attention to the island) and given the pennant number 83.

Until last year, progress was slow. But there has been a lot of work lately. Early in 2009, China moved the Shi Lang into dry dock, where work is now obviously underway to install engines and other heavy equipment. A year ago, the radar mast was completed, and now there is a Chinese radar system being installed. Officially, the Chinese say nothing. But the dockyard workers keep at it, and it’s possible to take photos from a distance. It appears that the Shi Lang is a year or so from going to sea.

November 11, 2010

Chinese wine buyers get all-VQA store that Ontario wine buyers can’t have

Filed under: Bureaucracy, Cancon, China, Law, Wine — Tags: , , , — Nicholas @ 12:56

I’m all in favour of improving the visibility and availability of Ontario’s VQA wines in other markets, so this news is both good and infuriating simultaneously:

A couple of weeks ago the Government of Ontario announced the opening of an all-VQA wine store in China (in the city of Zhengzhou, the capital of Henan Province). Oh happy day — now the Chinese can drink (and copy) all the Ontario icewine they want . . . but this begs the question: why should the Chinese have an advantage that we Ontarians do not? Do the Chinese drink more Ontario wine? Why is it so important that China get the opportunity to drink Ontario wines that folks in Thunder Bay, Sault Ste. Marie and Sudbury can not?

I have nothing against the Chinese getting their hands on our wine; I’m glad to see a country embrace our wines as so many of us have embraced their food. But seriously, why should folks living in China have more and better access to Ontario wines then those of us living in the actual province. When I first heard the news, all I could say was an incredulous, “Seriously?” Has Ontario really become, as wine writer Dean Tudor puts it, every time he mentions Ontario, “a have not province”? When it comes to our own wine industry it keeps getting more and more “have not” and won’t get.

See what I mean? Great that they’re opening outlets in a new foreign market, but we still can’t get that kind of opportunity to buy here at home? All-VQA stores have been discussed (and rejected) before, but they’re apparently a great idea for foreign markets.

Update: Fixed the broken link.

November 1, 2010

Shipping at Age-of-Sail speeds

Filed under: Asia, China, Economics, Germany — Tags: — Nicholas @ 12:40

In an attempt to save fuel, shipping lines have been ordering their ships to go slower. Some of them are now slower than 19th century clipper ships:

For those who haven’t followed the situation closely, many container ships right now have practiced ‘slow steaming’ due to a glut of ships being built worldwide.

Essentially, they are sailing at speeds well below their potential in order to reduce the supply of ships in the market, and thus support shipping rates.

The way this works is that the slower a ship sails, the fewer times it can make a round trip per year. Thus purposely sailing slowly reduces the effective supply of ships. It’s a response to insufficient shipping demand relative to the size of the global container shipping fleet.

Yet these poor shipping companies have taken this practice to such an extreme that many ships are now sailing at speeds slower than old clipper ships from the 1800’s.

H/T to Monty:

Overcapacity in shipping means lower demand for the finished goods overall. This is also a prime reason why export-driven economies (China, Germany) are in for a pretty dramatic adjustment soon. They’ve been counting on an economic recovery in America and Europe to soak up all that excess production, but it looks like things are going to stay weak for at least another six months to a year.

October 26, 2010

The intelligence bonanza of the 2001 American EP-3E incident

Filed under: China, Military, USA — Tags: , , , , , — Nicholas @ 12:30

If you cast your mind back far enough, you’ll remember the political impact of the mid-air collision between a Chinese fighter and an American EP-3E electronic surveillance aircraft. It certainly had the potential to turn into a major standoff between the two powers, but apparently the real story was the intelligence breach following the emergency landing:

On April 1, 2001, an American EP-3E Aries II reconnaissance plane on an eavesdropping mission collided with a Chinese interceptor jet over the South China Sea, triggering the first international crisis of George W. Bush’s Administration. The Chinese jet crashed, and its pilot was killed, but the pilot of the American aircraft, Navy Lieutenant Shane Osborn, managed to make an emergency landing at a Chinese F-8 fighter base on Hainan Island, fifteen miles from the mainland. Osborn later published a memoir, in which he described the “incessant jackhammer vibration” as the plane fell eight thousand feet in thirty seconds, before he regained control.

The plane carried twenty-four officers and enlisted men and women attached to the Naval Security Group Command, a field component of the National Security Agency. They were repatriated after eleven days; the plane stayed behind. The Pentagon told the press that the crew had followed its protocol, which called for the use of a fire axe, and even hot coffee, to disable the plane’s equipment and software. These included an operating system created and controlled by the N.S.A., and the drivers needed to monitor encrypted Chinese radar, voice, and electronic communications. It was more than two years before the Navy acknowledged that things had not gone so well. “Compromise by the People’s Republic of China of undestroyed classified material . . . is highly probable and cannot be ruled out,” a Navy report issued in September, 2003, said.

The loss was even more devastating than the 2003 report suggested, and its dimensions have still not been fully revealed. Retired Rear Admiral Eric McVadon, who flew patrols off the coast of Russia and served as a defense attaché in Beijing, told me that the radio reports from the aircraft indicated that essential electronic gear had been dealt with. He said that the crew of the EP-3E managed to erase the hard drive — “zeroed it out” — but did not destroy the hardware, which left data retrievable: “No one took a hammer.” Worse, the electronics had recently been upgraded. “Some might think it would not turn out as badly as it did, but I sat in some meetings about the intelligence cost,” McVadon said. “It was grim.”

H/T to Bruce Schneier for the link.

October 25, 2010

QotD: Mark Steyn on China’s coming demographic bomb

Filed under: China, Economics, Quotations, USA — Tags: , , — Nicholas @ 12:29

In 2009, the US spent about $665 billion on its military, the Chinese about $99 billion. If Beijing continues to buy American debt at the rate it has in recent times, then within a few years US interest payments on that debt will be covering the entire cost of the Chinese military. This summer, the Pentagon issued an alarming report to Congress on Beijing’s massive military build-up, including new missiles, upgraded bombers, and an aircraft-carrier R&D program intended to challenge US dominance in the Pacific. What the report didn’t mention is who’s paying for it.

Answer: Mr and Mrs America.

By 2015, the People’s Liberation Army, which is the largest employer on the planet, bigger even than the US Department of Community-Organizer Grant Applications, will be entirely funded by US taxpayers. When the Commies take Taiwan, suburban families in Connecticut and small businesses in Idaho will have paid for it.

[. . .]

Chinese state-controlled enterprises are buying up everything from copper in Canada to zinc in Australia to bauxite in Jamaica. They’re doing what the first settlers did vis a vis the Indians: They sell us trinkets in return for our resources. That said, I disagree with the conclusion of this video. The danger from China is not its strength, but its underlying weaknesses: As I wrote in America Alone, it will get old before it gets rich, and, unless it’s planning on becoming the first gay superpower since Sparta, the millions of surplus young men whom the One-Child Policy has deprived of female companionship is a recipe for profound social convulsions. That’s actually worse news than if China was cruising to global hegemony — because it means their calculations on how the Sino-American relationship evolves are even less likely to align with ours.

Mark Steyn, “Campaign Countdown”, SteynOnline, 2010-10-25

October 17, 2010

New laws aim to reduce military corruption in China

Filed under: China, Economics, Military — Tags: , , — Nicholas @ 11:39

Strategy Page looks at the latest attempt to curb military corruption:

China is enacting new laws that puts additional pressure on the military to maintain quality standards (in the construction and use of military equipment). Why should something like this be thought necessary? It’s all because of corruption, an ancient, and growing, problem in China. There, it is taken as a given that, if you get a government job, you have a license to steal. In the military, this means weapons are built in substandard ways, and equipment is not properly maintained. Military corruption is an ancient Chinese custom, and accounts for most of the poor military performance in the past.

For over a decade, the government has worked to eliminate the worst of the theft and moonlighting by the troops. The most outrageous examples of this have been curbed. Thus military officers no longer use cash from the defense budget to set up weapons factories they run and profit from. Big chunks of procurement cash no longer disappear into the offshore bank accounts of generals and admirals.

It’ll take more than new laws and a few high-profile prosecutions to tackle a problem that has been endemic for generations.

September 29, 2010

Austin Bay summarizes the demographic problems China is facing

Filed under: China, Economics, Environment — Tags: , , , — Nicholas @ 09:11

This is all old hat if you’ve been reading the blog for a while, but it’s always good to see a good summary of key points, like this list by Austin Bay:

Internal Disorder: China’s primary threat is not the United States, or any other foreign power, but internal disorder. There are more angry people in China every day, and the government knows that this could blossom into widespread uprisings. It has happened so many times before in Chinese history. Protesting factory workers are an indicator.

Corruption: Corruption is the biggest complaint among China’s discontented; government officials, who are more interested in enriching themselves than in taking care of “the people” are particular targets. Many of the demonstrations and labor disruptions are the result of corruption among local officials, including the police.

The Communications Dilemma: In 2007, Chinese Internet use grew to over 210 million users. Cell phones are also increasingly available. China is the world’s largest cell phone market. The Internet is an economic and educational tool. However, it also undermines an authoritarian government’s ability to control (deny and spin) information. China’s 2010 “war with Google.com” illustrated this dilemma.

Ethnic Minorities and Language: China has a population of 1.4 billion. Han Chinese (“ethnic Han”) constitute approximately 92 percent of China’s population. China also has 55 “minority nationalities,” however, amounting to 100 million people. The 2009 Uighur riots in Xinjiang province (western China) and resistance in Tibet are symptomatic of the problem. They are resisting “Hanicization.”

Pollution and Water: In early 2008, China began shutting down “high pollution” factories. The reason? To clear the air for the 2008 Beijing Olympics. The growing wealth of the Chinese people is causing enormous pollution problems and water shortages. Effective pollution controls mean more expensive production methods. That makes Chinese goods less competitive.

The Marriage Gap: China’s “one child” policy crimped population growth, all right. More boys were born than girls; Chinese culture “favors” sons. As a result, there is a serious imbalance between men and women. In some places, there are 120 men per 100 women. Marriageable daughters are, reportedly, going largely to the upper social groups within each village or district. The sons of the poorest families are, to an extent, not finding wives. This is an indicator of future social trouble.

As I’ve said several times before, I’m not anti-Chinese: China has accomplished economic marvels in amazingly short time spans . . . but not without serious costs. Urban and coastal dwellers have benefitted disproportionally from the growth: rural and inland Chinese have suffered to provide the means for that growth. China is still not a free economy, and still represses dissent, imprisons critics, and controls far too much of the country’s economy both directly and indirectly. Corruption is rife, despite the savage punishment meted out to (some of) the (accused) perpetrators.

China’s miracle can’t continue for much longer unless the government starts to address these problems with the same kind of single-mindedness that they’ve brought to other problems. Introducing the rule of law would be an excellent first step, but it would directly challenge too many powerful men, some of whom (literally) have armies.

August 14, 2010

China’s petroleum producers make more sense than the US government

Filed under: China, Economics, Environment, USA — Tags: — Nicholas @ 01:01

Not everybody has bought into the “ethanol as a clean alternative to petroleum” bullshit: China’s petroleum producers are asking the Chinese government to stop subsidizing the corn-to-ethanol project (similar to the US government’s subsidy program).

[. . .] to enjoy the subsidy of 1880 Yuan per ton of alcoholic gasoline for vehicles and the tax-exemption policy for the corn-to-ethanol project, some plants in China began a wave of buying corn, causing the severe shortage of corn for animal feed and the rapid increase of corn prices.

“In the first half year of this year, China imported 78 million tons of corn, mainly due to the higher domestic corn price than overseas. In July, the average corn price in northeast China was 1845 Yuan per ton, rising by 15.7% year on year” said Zhang Jianbo, a market analyst with Distribution Productivity Promotion Center of China Commerce…

Of course the US has also been criticized for this insane subsidy of corn ethanol as well and blamed for dramatic price increases in corn based products in Mexico, and South/Central America.

The bottom line is corn ethanol makes no economic sense, never did, and when the total environmental impact end-to-end from dirt farm to tailpipe is considered, its even worse than ordinary gasoline. Its always been a lose/lose proposition all the way around, and many of the environmental groups have started to cool on their enthusiasm for it as the real cost/impacts manifested themselves.

Even if you’re not a whole-hearted “green”, this kind of market-rigging by government intervention should be greeted with derision: it’s not “green” to consume more resources to produce a less energy-intensive end-product and pretend it’s a viable substitute. This is another case where the government would produce better environmental results by burning the dollar bills rather than using them to subsidize corn production for ethanol.

July 26, 2010

The unwillingness to disbelieve

Filed under: China, Economics, India, Media — Tags: , , , , , — Nicholas @ 15:03

Mike Elgan debunks the latest “mind-crogglingly cheap computer for the masses” announcement:

“India unveils $35 computer for students,” says CNN.com. “India unveils prototype for $35 touch-screen computer,” reports BBC News. “India to provide $35 computing device to students,” says BusinessWeek.

Wow! That’s great! Too bad it will never exist. That this announcement is reported straight and without even a hint of skepticism is incomprehensible to me.

[. . .]

India itself doesn’t build touch screens. They would have to be imported from China or Taiwan. The current price for this component alone exceeds $35. Like touch screens, most solar panels are also built in China. But even the cheapest ones powerful enough to charge a tablet battery are more expensive to manufacture than $35.

Plus you need to pay for the 2GB of RAM, the case and the rest of the computer electronics. Even if you factor in Moore’s Law and assume the absolute cheapest rock-bottom junk components, a solar touch tablet with 2GB of RAM cannot be built anytime soon for less than $100.

More to the point, no country in the world can build a cheaper computer than China can. The entire tech sector in China is optimized for ultra-low-cost manufacturing. All the engineering brilliance in India can’t change that.

There’s also the point that government bureaucracies and university engineering departments are not designed for or experienced in the mass production techniques that any of these “ultra-cheap but powerful” computing initiatives all require. Have you ever heard of a government that could keep their hands (and political priorities) out of the critical decision of where this wonder device would be assembled, tested, packed, and distributed? The “industrial policy” wonks would need to get intensely involved in such a decision and the location would have to meet diverse electoral and financial requirements (note that the economics of the project won’t even make the top five priorities in the process).

Awarding the contract to just one area would be unthinkable: the benefits must be seen to be helping areas that elected the current government and emphatically not going to opposition ridings. The horsetrading over that alone would consume any possible price advantage such a scheme might have over ordinary computers and software bought commercially.

July 15, 2010

Reasons not to get angsty over China’s growth

Filed under: China, Economics, Government, USA — Tags: , , , — Nicholas @ 10:02

The ever-sensible and highly entertaining Monty points out that Americans fretting over the growth of the Chinese economy are bothered over (comparatively) minor issues:

The angst over China’s economic ascent continues to smell rather strongly of the same panic the US felt over Japan in the 1980’s. I respond to this panic in two ways: 1) I am happy for the average Chinese citizen, who is finally seeing some benefit from their labor after 400 years of failure and ineptitude — they deserve any success that comes their way; and 2) America is in the enviable position of being able to worry about unlikely hypotheticals because we are the world’s largest economy and will continue to be so for much of the 21st century and perhaps beyond. We face severe problems — public spending being #1 among them — but our competitors also have problems, in many cases more dire than our own. We as a people have a habit of overestimating our own problems and underestimating those of our adversaries. Don’t begrudge the Chinese people some measure of success; just hope that they can cast off their Communist government and move towards being a freer people. There may come a time when the US and China square off as enemies rather than just competitors, but that outcome is not inevitable.

Fitch agrees with me about taking the whole “China is taking over the world” thing with a grain of salt. The Chinese are hiding an enormous amount of bad debt. If China hopes to succeed beyond their export-driven economy, their finances are going to have to become more transparent. And when/if this happens . . . look out below. That crash is going to make our little economic vacation of the past couple of years look mild in comparison.

I know that it may appear that I’m anti-Chinese based on some of my past economic postings, but that’s not true. I’m actually quite positive about China in the long term — once they manage to get rid of the last trappings of authoritarian government and overcome the huge dead hand of army-controlled crony capitalism. Most Chinese markets are not yet free, but they’re in most cases far more free than they were a decade ago. That’s wonderful, both for ordinary Chinese people and for the rest of the world. China has immense untapped resources of skills, talents, and ideas that can’t be accessed in a controlled economy. If-and-when their economy becomes as free as typical western markets, sit back and watch all that human ingenuity go to work.

On the down side, while China is becoming a bit more free, many western countries are becoming less so: piling on regulations and creating additional barriers to economic growth (Canada, for the most part, has not been doing this . . . it’s a significant factor in Canada’s escape from recession). If these trends continue, perhaps the worriers-about-China will see the Chinese economy vault into first place as the American government tries to control everything.

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