RMB Wrapup, Can China Sustain, and Will We Be Here to See it?

Monday, August 27, 2007 10:02
Posted in category The Big Picture

Here are a few of the articles and reports that were at the top of my list for this week. It is a bit deeper than usual, but each of these articles/ reports contain information that I think everyone should take the 20 minutes to read and reflect on.

Report РChina’s Currency: A Summary of the Economic Issues (PDF)
Lost in all the recent product safety reports, has been the RMB… and while I am generally against the idea that China competes unfairly from the “undervalued RMB”, I put this report on my list of things to read this week as it provides a generally fair and balanced look at the RMB issue. for those who are not familiar with the history of the issue, or what effect an undervalued currncy can have, then you will find the article particularly interesting and informative.

Is China’s Economic Growth Sustainable? (PDF)
During my nearly 6 years in China, I have gone from being awe struck by the pace at which things move, to more realistic. While limited in scope, it is clear that with development comes cost, and over the last 6 months I have thought at times “Is China’s hyper development sustainable”. for those that are also asking that question, I suggest this article written by Alu Wyne. While only at 3 pages, the article is well written and does a good job of highlighting a number of keys points related to China’s ability to keep the ball rolling.

The personal price of doing business in China
China is a mix of old… and new.. good… and bad… and Silk Road’s post entitled the Personal Price of Doing Business in China does an excellent job of summing it all up. For those that do not remember the roller coaster ride I described, and admitted to loving, in my post celebrating my 5th year anniversary, you will see many similarities. To be honest, this is a topic that is discussed often in China, and for many it is a matter of accepting the toll on one’s health as part of the package. Stress levels are high, days are long, and you can sometimes taste the chemicals in the air… but for anyone still here, that is still not enough.

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4 Responses to “RMB Wrapup, Can China Sustain, and Will We Be Here to See it?”

  1. YJ says:

    August 29th, 2007 at 11:33 am

    I imagine they are very good reports! But the first two PDF files are inaccessible.

    The blog “The personal price of doing business in China” is very insightful as I could appreciate both sides of the picture as a person who has a Chinese root and had just visited China for five weeks.

    Thanks for the wonderful postings.
    YJ

  2. Romain Guerel (French moving back to Shanghai) says:

    August 30th, 2007 at 4:08 am

    Is China growth sustainable? I would say yes and no. There is still a tremendous amount of opportunities in China for Foreign and Chinese companies but it will depend on China and its leaders whether they continue their reforms to a more friendly market economy. Other questions are inflation, pension system, social security. I would also add that by becoming at the end of 2007 the 3rd biggest economy in the world, China will face more scrutiny, questioning and accountability. The terrible challenge is what may be seen good for the Chinese ego may not be good for the World economy.

  3. Rich says:

    August 30th, 2007 at 7:12 am

    Romain,

    Thanks for stopping in… you have brought some interesting points with you.

    For me, I first believe that in the end, China will do what is best for China regardless of international scruity. This has been proven over and over again as China experiences growing pains.

    What I wonder is whether or not China can manage its own internal give and take when figuring out what is best for it. There are discussions that Oct 15 will see a significant reduction of power at the local level, that economies will begin taking more direction from Beijing, etc…. but is that feasible? Will the local officials begin to tow the party line and believe in the longer term vision while their people potentially lose in the short term.

    Becoming the third biggest economy is something that Beijing and its 1.3 billion people are and will continue to be proud of, but I have spoken to a lot of people who are questioning whether or not the costs were worth it. Whether the environmental damage, the tearing apart of families, and the other cracks that have become so public were worth the glass buildings, the gold watches, and the Chivas + green tea.

    For me, it is pretty clear that someone somewhere is going to have to give. As the articles say, not everyone can live as Americans do and as China strives to get there, raw materials are going to either be depleted or the prices are going to go up.

  4. YJ says:

    August 30th, 2007 at 11:59 am

    Finally downloaded and read the two reports.

    I am very much in agreement with the CRS report on the RMB vs. US dollar issue. Most of the Washington politicians fail to realize how much the US economy has gained through the Chinese foreign reserve and cheap imports. That’s reason why I (and many others) have 5% on a 30-year mortgage vs. 15% for the homeowners in the early 90s.

    While I am enjoying the cheap imports and loans from China, I hope the Chinese government would spent some of its vast foreign reserve to build schools, hospitals, and other programs that will further lift the standard of living in China. This will promote the domestic spending in China while encouraging the American to save, instead of spending their money like it is free.

    China stands to gain with the appreciation of Yuan. The key is how to manage the downside risk of the diminishing value of the foreign reserve, which is accumulated through the tremendous sacrifices from millions of laborer from Sichuan or elsewhere, as Yuan appreciates.

    On economic growth, I believe China will continue to grow in a fast pace for about another 15-20 years. My reasoning is this: the Chinese baby booming was between 1960-1980. The boomers have better education and economic opportunities than any generation in recent Chinese history. The economy will grow when the boomers are in their high productivity age.

    An appreciated Yuan would promote an organic economic growth in China through better resource utilizations.