China Challenges

What Is the Cost When Immigrant Entrepreneurs Go Home?

Knowledge at Wharton says:

In 1980, immigrant entrepreneur Vivek Wadhwa came to the United States and stayed, starting two companies that created more than a thousand American jobs. Now an academic, Wadhwa sees first hand that today's immigrants are not following his lead. Every year he asks foreign students in his classes at Duke University how many intend to stay permanently in the United States. "It used to be that everyone raised their hand," Wadhwa says. "Now they look at you funny. They say, 'What does that mean?'"

For a majority of highly skilled immigrants who want to start companies, the promised land is no longer the United States, writes Wadhwa and four co-authors in a recent report from the Kauffman Foundation, a Kansas City, Mo.-based non-profit that supports research on entrepreneurship. In "The Grass Is Indeed Greener in India and China for Returnee Entrepreneurs," the researchers surveyed 153 professionals who returned from the U.S. to India or China to start a business. They found that 72% of Indians and 81% of Chinese said the opportunities to start a company in their home countries "were better or much better" than in the United States.

Some say the flow of immigrants back home is a "brain drain" for the U.S. that calls for an immigration policy overhaul. Sending would-be entrepreneurs packing robs the United States of new companies, new jobs and long-term economic growth, they argue. Others say the pull is as strong as the push: that as economies blossom in China and India, the opportunities sprouting on native turf are simply too tempting to resist. Some experts maintain that returning immigrants don't actually spell a net loss for the United States anyway. They see the flow as more of a "brain circulation" that benefits economies on both sides of the sea.

Wadhwa, a senior research associate at Harvard Law School and director of research at Duke's Center for Entrepreneurship and Research Commercialization, falls on the "brain drain" end of the spectrum. "It's not a brain drain; it's a brain hemorrhage," he insists.

Read more: http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2426&languageid=1

The End of Cheap Labor in China

Time reports:

On May 25, U.S. businessman Charles Hubbs made the short trek to Hong Kong from his office just outside Guangzhou, a city in Guangdong province in southeastern China that is known for good reason as the manufacturing workshop of the world. For the 64-year-old native of Louisiana, it was a trip that may have marked the beginning of the end of his successful 22-year run as a China-based exporter of medical supplies.

Hubbs was going to listen to a pitch from the American ambassador in Cambodia, Carol Rodley, and the president of the American Chamber of Commerce in Phnom Penh. Their aim was simple: to get foreign investors, particularly those already with operations in China, to consider setting up shop in Cambodia. Hubbs was all ears.

To hear him tell it, the price of labor is on the brink of making his firm, Guangzhou Fortunique, which supplies some of the U.S.'s biggest health care companies, uncompetitive. "We've seen our wage costs in China go up nearly 50% in the last two years alone," he says. "It's harder to keep workers on now, and it's more expensive to attract new ones. It's gotten to the point where I'm actively looking for alternatives. I think I'll be out of here entirely in a couple of years."

Read more:  http://www.time.com/time/printout/0,8816,2078121,00.html

Poisoned workers in China want an apology from Apple

The Shanghai Daily reports:

LYING in bed in his hometown in Shandong Province, 27-year-old Jia Jingchuan fears for his future.

The path the rest of his life will take is bound to the nerve damage he has suffered as a result of chemical poisoning. This may further deteriorate into muscle atrophy if he does any kind of manual work.

Jia is one of 22 workers who earlier this month quit their jobs at a Suzhou factory making touchscreens for Apple.

They did so to receive compensation ranging from 50,000 yuan (US$7,724) to 180,000 yuan for nerve and muscle damage caused by poisoning at work.

The 22 workers are among 137 workers who were hospitalized in February after being poisoned by chemicals while working for Apple supplier Wintek.

The remainder of the victims are either still in hospital receiving treatment or back working in the factory.

They can only get compensation if they quit their jobs, and they fear no other companies would hire them due to their current physical condition.

Having personally received 130,000 yuan in compensation, Jia told Shanghai Daily the group who quit were relieved to see their six-month campaign achieve success.

However, that's not the end of the matter, said Jia, as he believes Apple still owes the group an official apology.

"We fought to leave the factory with enough money to start a new life, and we made it," said Jia,

"But I won't stop fighting until Apple stands up and says sorry for poisoning us."

An unnamed Apple official told the Beijing News newspaper that "Apple spends plenty of time and effort every year investigating its suppliers and punishes violations. In this particular case, Apple has expended great effort."

Read more: http://www.shanghaidaily.com/nsp/National/2011/06/25/Poisoned%2Bworkers%2Bwant%2Ban%2Bapology/

No Stronger Uptrend Than With China's Yuan

Danny Furman says:

Due seemingly to lack of interest from investors and forex markets, the NYSE traded Yuan ETF (CYB) has failed miserably to track the appreciating currency. Trading appeal has been further subdued during speculative periods fueled by low interest rates in the United States, in which more liquid emerging market currencies have outperformed the yuan. Deflationary shocks have wiped out many gains in other currencies, however, while the yuan has held ground or risen against the world reserve currency during current and prior flights to safety.

After listing in 2008, CYB traded at a premium to NAV for almost two years. Massive selling while asset markets were weak in Spring 2010 reversed CYB to trading at a discount to NAV. It is up less than 1% in 2011 while forex trading has the yuan up 2% versus the USD on the year. More drastic moves may be necessary for performance to overcome relatively steep management fees.

Technical stock analysts likely glance at CYB and disregard the stagnant chart. Forex traders, however, know that the yuan is undergoing an unparalleled bull run. The currency has more buying power in terms of labor productivity than any other on the planet and belongs in all conservative portfolios one way or another.

Read more: http://seekingalpha.com/article/276519-no-stronger-uptrend-than-with-china-s-yuan?source=email_global_markets

The Risk of China's Black Box Economy

Cullen Roche writes:

Shibor is blowing out again in China (h/t ZeroHedge). Shibor is the Shanghai Interbank Offered Rate. This is the rate at which banks lend in the interbank market. It’s generally viewed as a sign of stress levels in the banking sector. Latest readings show the rate approaching levels seen only a few times in the last few years:

What’s so interesting about all of this is that it appears to be due to the reckless stimulus and central planning approach implemented by the Chinese government.

Read more: http://seekingalpha.com/article/275637-the-risk-of-china-s-black-box-economy?source=email_global_markets

 

MNCs in China: Missing the Point?

The FT reports:

. . .according to the American Chamber of Commerce in Shanghai, which today published a report on the China consumer market with management consultants Booz&Co, MNCs are missing a trick or two, when it comes to e-commerce.

After surveying 135 companies competing in China (foreign and local), the report found that 93 per cent of Chinese respondents already use, or plan to use the internet as a selling tool – while a staggering 41 per cent of multinationals do not now, and do not even plan to do so in future. More than twice as many Chinese companies in the survey said at least 11 per cent of their revenue already comes from “technology-enabled transactions”.

Chinese companies are also investing in research and development for the mainland market far more seriously than their foreign rivals – a trend that multinationals ignore at their peril, says JoAnne Bessler of Booz, one of the report’s authors. Some 61 per cent of Chinese companies surveyed said they were expanding or planning to expand their R&D capability in China, compared to only 26 per cent of Western multinationals.

That kind of R&D push could soon turn the conventional wisdom about China on its head – that Chinese companies have the advantage on cost, while foreign companies have the lead on quality and innovation.

“Chinese companies are able to move dramatically faster than MNCs, and able to innovate sometimes twice as fast,” says Ken Newell, China President of Pepsico. “If companies miss the opportunity to invest in R&D here…I think it will be too late”.

Chinese companies are also blissfully unworried about recruiting and retaining quality staff, with only 13 per cent of Chinese respondents expressing concern about that – compared to nearly three quarters of foreigners. That may reflect another recent trend that could dwarf all the others: a marked decline in the percentage of Chinese job seekers who want to work for a foreign company, instead of a home grown one.

Read more: http://blogs.ft.com/beyond-brics/2011/06/13/mncs-in-china-missing-the-point/#

China Surpasses US In Energy Consumption

FuturePundit says:

BP's 2011 Statistical Review of World Energy is out and the biggest news: China has become the biggest world energy consumer.

BP, in its 60th annual Statistical Review of World Energy, said China accounted for 20.3 per cent of demand, compared with the United States' 19 per cent.

The report said China's consumption rose by 11.2 per cent last year. American demand increased 3.7 per cent.

For carbon dioxide emissions China already blew past the United States about 5 years ago due to China's much heavier reliance on coal. Now China has surpassed the US in total heat energy used across all energy types. The Chinese economy's heavy reliance on coal makes it more immune to high oil prices. Though high level of car sales in China threatens to make China much more vulnerable to high oil prices.

Read more: http://www.futurepundit.com/archives/008138.html

US Job Growth - Who Creates the Jobs?

Time says:

Nobel laureate Michael Spence, author of The Next Convergence, has looked at which American companies created jobs at home from 1990 to 2008, a period of extreme globalization. The results are startling.

The companies that did business in global markets, including manufacturers, banks, exporters, energy firms and financial services, contributed almost nothing to overall American job growth. The firms that did contribute were those operating mostly in the U.S. market, immune to global competition — health care companies, government agencies, retailers and hotels. Sadly, jobs in these sectors are lower paid and lower skilled than those that were outsourced.

"When I first looked at the data, I was kind of stunned," says Spence, who now advocates a German-style industrial policy to keep jobs in some high-value sectors at home. Clearly, it's a myth that businesses are simply waiting for more economic and regulatory "certainty" to invest back home.

Read more: http://www.time.com/time/printout/0,8816,2076568,00.html

In China, Women Begin Splurging

WSJ says:

Women accounted for more than half of China's estimated $15 billion in luxury sales in 2010, according to a survey by consultancy McKinsey & Co. That compares with 45% in 2008, when McKinsey conducted its previous survey. The average female luxury consumer in China also spent 22% more in 2010 than in 2008, while men spent only 10% more.

Read more: http://online.wsj.com/article/SB10001424052748703864204576315291406475666.html?mod=WSJ_hp_us_mostpop_read

Chinese GDP Data: How Reliable?

The WSJ reports:

How big is the Chinese economy? Answering that question is not as straightforward as looking up the number on the National Bureau of Statistics website. China’s GDP data is haunted by controversy, with widespread doubts about its accuracy.

The release last year of U.S. diplomatic cables by Wikileaks has added further fuel to the fire. Records of a 2007 conversation between China’s Vice Premier Li Keqiang – then the Party Secretary of Liaoning province, and U.S. Ambassador Clark Randt – revealed that Mr. Li had little faith in the GDP data, at least at the provincial level.

A smiling Mr. Li said that the GDP data was “man made” and “for reference only,” according to the Wikileaks cable. To keep track of growth he preferred to look at three different indicators: electricity output, freight hauled by rail and bank loans.

But is the man tipped to be China’s next premier right to distrust the GDP data?

Read more: http://blogs.wsj.com/chinarealtime/2011/06/10/chinese-gdp-data-how-reliable/?mod=WSJBlog

How to Tap China’s Super Spending Women

Shaun Rein says:

My firm recently interviewed peasants who had moved to Beijing and Shanghai. Nearly 80 percent of the women reported earning more than husbands. Common jobs for uneducated women – maids, foot masseuse – often pay $300-$400 a month while typically male jobs like construction pay falls in the $150 to $200 realm. Shifting earning power is altering family dynamics.

Just three years ago, most internal migrants left children at home to be raised by grandparents. Now, 10 percent of the respondents told us that the men had already returned home to be near children and many would consider doing so because urban salaries were not much higher than those at home.

With urbanization rates hitting 50 percent this year for the first time, up from 30 percent a decade ago, and as China’s manufacturing shifts away from labor intensive industries to automated, more women will become empowered.

Understanding how rising Chinese women think and what they want will be critical for brand managers selling to them. Women’s biggest concern our research suggests is product safety.

Read more: http://www.cnbc.com/id/43290845/How_to_Tap_China_s_Super_Spending_Women

Fall in student numbers in China hits universities

Shanghai Daily says:

IT might have been hard for Chinese universities, after a decade of soaring enrollment and millions of candidates fighting for places via make-or-break exams, to foresee a day when they might have to fight to survive.

That day, however, may have arrived.

About 9.33 million students have registered to take the annual national college entrance exams, or gaokao, which start today. That's 240,000 fewer than last year's figure and represents the third straight year of decline.

Ma Yan, a senior consultant for MyCos, a Beijing-based higher education consulting firm, said: "The decline is mainly due to the shrinking number of high school students, which is a result of decreased birth rates caused by China's one-child policy.

Ma said the downward trend in enrollment may last until 2018.

Chinese students usually take entrance exams at the age of 18 after 12 years of primary and middle school education.

Read more: http://www.shanghaidaily.com/nsp/National/2011/06/07/Fall%2Bin%2Bstudent%2Bnumbers%2Bhits%2Buniversities/

China's Tax authorities eye certain high-income earners

The Shanghai Daily says:

HIGH-INCOME earners in certain industries as well as highly-paid expatriates will come under tighter scrutiny from China's tax authorities who are responding to public complaints over tax evasion or underpayment of taxes by these people.

Tax officials at all levels have been ordered to prioritize collecting taxes and supervising high-income earners in industries including property, trust, resources and private equities, according to recent notice from the State Administration of Taxation.

Read more: http://www.shanghaidaily.com/nsp/Business/2011/06/06/Tax%2Bauthorities%2Beye%2Bcertain%2Bhighincome%2Bearners/

China as an Economic Savior

Thomas Fricke says:

For years now, the threat of Chinese competition has been used as a bogeyman to force workers to accept lower wages, to cut social security spending and to praise Germany's proposed set of labor market and social system reforms (known as Agenda 2010). It was even enough to fill entire books by sensationalistic authors with more or less crazy theories about Europe's general demise.

That is now over. What has been observed for some time now has reached a spectacular new dimension since the outbreak of the financial crisis. Exports by Western companies to China have grown to such an extent, in such a short span of time, that there now are signs of a trend reversal. (At the same time, Asia's cost advantage has been dwindling.) Suddenly this huge country is emerging as a totally new growth factor. These changes, after 30 years of fear, are ushering in a completely new phase of globalization — one that will mainly benefit those countries that were most affected by cheap competition from China, including Europe's current crisis countries.

Although Germany has enjoyed rising exports to China for years, this phenomenon is not confined to Germany. French exporters are witnessing a similar boom.

Asia's two largest emerging market economies, China and India, together exceed Germany as an import destination by 60% to 70%. At the beginning of 2009, the figure was a mere 20%. Germany, for one, has heeded this import boom: Over the past few years, China has overtaken Belgium, Switzerland and Poland in the ranking of Germany's key export markets.

Read more here: http://www.theglobalist.com/StoryId.aspx?StoryId=9163

The Three Gorges Dam 'Failure'

Shanghai Daily says:

The Three Gorges Dam project failed to consider the full impact it would have on the ecological environment during its early design, an official admitted yesterday.

But he said the impact could be minimized by proper water discharges from the reservoir to the Yangtze River.

The dam, the world's largest hydroelectric project, had contributed to the lowered water levels of Dongting Lake in Hunan Province and Poyang Lake in Jiangxi Province, Wang Jingquan, deputy inspector of the flood control and drought relief office affiliated to the Yangtze River Water Resources Committee, told Xinmin Evening News.

China's two largest freshwater lakes are drying up during the current drought in the middle and lower reaches of the Yangtze River.

The level of the Yangtze River would be lower after the dam's reservoir began storing water in October every year, thus causing water from the two lakes to pour into the river, Wang told the newspaper.

Water levels of the Poyang Lake had been above 19.5 meters but dropped to just 16 meters after the main part of the dam was completed in 2006, according to Tuesday's Oriental Morning Post.

The State Council, China's Cabinet, has approved bringing forward the water storing period of the reservoir by a month, to September, when both the Yangtze River and the lakes had sufficient water, Wang said.

The dam also had an impact on the wildlife and plants in lower reaches of the Yangtze, said Wang. It made the water in the river flow more slowly and that had affected fish breeding patterns. The lower water levels had an effect on the growth of some water plants, he added.

He said the committee was still looking for solutions to the impact on the river's ecosystem.

"We failed to think of all the impacts that the dam might bring about when designing the dam, but its advantages should outweigh the disadvantages," he said.

Read more:

http://www.shanghaidaily.com/nsp/National/2011/06/02/The%2BThree%2BGorges%2BDam%2Bfailure/

Do knockoff Prada bags help the company sell more of the real thing?

Slate reports:

If New York City councilwoman Margaret  Chin has her way, it may soon be illegal to own a fake Prada handbag, or any of the other counterfeits openly sold in her Chinatown district, the "ground zero" for New York's knockoffs. Chin's proposed  $1,000 fine for counterfeit buyers is merely the latest salvo in the war against designer rip-offs waged by the FBI, industry groups, and designers themselves.

Yet a preliminary study focused on counterfeit sales in China—the source of all those fake handbags in Chinatown and just about everywhere else—suggests that in many cases the sale of fakes may not be so bad for legitimate brands.

Read more here: http://www.slate.com/id/2294927?wpisrc=newsletter_tis