chinaresourcenetwork.com

I have seen myself and had confirmed by other travellers here that since the economic slump hotels are changing. The ratio of local business people to foreign visitors has gone up, and with it the hotels are being forced to offer free wifi (the chinese wont stand for paying for it again- yeah for them), change the offerings on the breakfast buffet, and have limited hours on services used mostly by overseas guests (the business office is “ring when you need help” and not open all day).

A temporary shift - or sign of things to come?

Just got into China in the last couple days and Shanghai is looking a lot like Beijing pre-Olympics. Getting ready for the Expo in 2010, and my driver was trying to use GPS to get us to Ningbo today- and the streets change on a monthly basis so technology can’t keep up! I had dinner in a friends apartment last night, and they live a block away from the expo site. Its been great for their property values, and she was saying that overall good locations in the city were up 30% in the last year.

Down in Ningbo real estate is the same - massive building boom and prices are still rising. Something is working….although you still here about material price increases (steel has gone up in the last couple of months) and price wars (major shipping price war since early spring is still going on).

Its anything but stable. Still, in my favorite publication of all time - The China Daily - they are crowing that ex Microsoft China CEO Tang Jun is now moving his money into the “safe” Chinese banks because some of the funds he invested in, in the US, were invested in Maddoff and he lost almost $3 million. They also talk about a lending contraction (which has been going on for a couple years in certain segments).

So - its anyone’s guess right now. Some companies are holding on and looking to take market share. Others are slowly running out of funds and shutting down.

Now more economists are questioning China’s numbers. For all the stabalization of their economy - I keep hearing about component factories going under. Stable, non-sexy businesses in casting roughs or producing power cords. They have run out of funds to keep themselves afloat when business is down. My client vendors are searching for alternative component factories….but I just got a call from a Chinese American just back from a summer in China - and he thinks things are booming. So does the Chinese government….

And here is an article on how China is calculating its 8% growth rate:

http://articles.moneycentral.msn.com/Investing/JubaksJournal/chinas-recovery-is-it-for-real.aspx?OCID=eml_msnnl_6009.13.2.17&REFCD=emmsnnl_6009.13.2.17

China’s next handover at the national level will happen in a couple years - and the next generation of leaders has been identified and groomed. What is interesting is that they are broadly defined into two camps - the Elitists and the Populists. The Elitists came up through central communist party families and the Populists through rural Chinese youth league groups. One form each camp will hold the top two posts and “share” power.

One is current Vice-President Xi Jinping, a former party boss in Shanghai and Zhejiang and he will succeed Hu. Vice-Premier Li Keqiang will likely succeed Premier Wen Jiabao. This is the fifth generation, and there are fewer engineers and more management and finance majors, including successful entrepreneurs. Most of the fifth generation of civilian leadership were educated in Chinese elite universities.

It will be a peaceful turnover of power, and little is expected to change when it happens. How they will respond over the next few years of their tenure could change though. This group is one that has seen China’s power and economic strength grow during their adult years - they aren’t just looking at how to lift China up, but how to stabilize and secure its place in the world.

To jump start exports, China has been increasing the rebates on VAT exports. Basically your supplier pays for the VAT tax on the invoice value when you buy components, but don’t pay tax again when you export - but you still get a rebate on what you paid on the component purchases.

So if you get a higher rebate (the pay out amount is 17%, but the rebate can be less than 17%) then you basically net a higher profit - especially if you don’t pass that on to your customers.

But is this really helping China to increase exports? From what I hear in discussions with factories around China there hasn’t been much improvement. Even factories in core industries (not labor intensive commodity) are now facing shut down - and thats all over the country.

Yet China’s economy is showing some signs of recovery. They have also been pumping stimulus money into infrastructure projects and health care reform. Maybe that’s the fire behind the smoke?

This is the heavy production season in China, pre-Christmas rush that needs to ship out by end of September. We will see what the numbers tell us at the end of this period.

If we had a short stimulus pushed blip on the economic screen - or they are beginning to recover.

Most of our work with companies in the last six months has been discussions on how to ramp down business.

Some of their questions have been:

Layoffs in China - what are the legal issues? how about severance and bonus payout? can we keep them and just cut salaries?

Cutting costs - is this a good time to renegotiate leases? what about bank loans? can we do anything about the high costs of maintaining a company in China - there are do many reporting requirements?

Other issues - can we delay or decrease registered capital in a startup? what if we aren’t going to be profitable quickly enough and need to increase it, but would rather make a loan? can we shut the business down - what will that take?

China is sticking its toe into making the Yuan more of a freely traded world currency. They are hesitant, because the more the Yuan is being traded and used as an exchange currency, the less control they may have over the value.

A quote from www.ibtimes.com on their immediate plans for globalizing the Yuan:

“Chinese currency should become a major means of trade settlement before it rises to a major currency in the world, and the nation is now working in that direction via the pilot project,” Zhijie Ding , vice dean of finance at the University of International Business and Economics, told China Business Weekly. Given China’s determination to reduce its reliance on the dollar, Ding said the Chinese yuan could go global in the next two to three years.”

What does this mean for the dollar? That is the concern here in the US. The dollar has been China’s “gold reserve” for years - and without them to prop us up….what happens to our currency value - and therefore our trade and financial clout?

China has pulled back its requirement for all computers sold in China to have the spyware installed.

What is probably happening now? Heads are rolling - whatever department or agency that came up with this scheme is being hauled in front of the main governmental bodies to be thrashed. Not only for putting out a policy that is impractical / impossible to carry through. But also (and more importantly) for embarassing the government because of what a poorly thought out mess the whole event became.

For all their central government efficiency and ability to mobilize massive resources, they are running a big country with a lot of people. This is a reminder that there are still a huge number of agencies, departments, and divisions that obviously can get far enough along on establishing policy before the central powers realize what’s happening.

And news continues to come out that this H1N1 flu is more dangerous than than the normal flu (recently that it attacks deeper into the lungs than normal flu) it would be prudent to plan your fall/winter travel accordingly.

I just returned from Turkey (with a stop over in Paris). Coming in to Paris CDG from the US - you fill out health forms. Coming into Paris CDG from Turkey - no forms.

The US is still targeted as a major center of contamination. China is still boarding and taking temps on flights inbound.

Travel in August / September if you can - just in case the flu season does turn out to be more severe. It will simplify your travel plans (less chance of being pulled for quarantine) and hopefully keep you from being exposed while flying!

The Turks have a strong tie with the Uighurs in Western China. They share common language roots and the Turks tie their ethnic history with the ethnic minority in Xin Jiang.

While in Turkey this week, you can read in the local papers about Chinese trade missions here in Turkey to establish new cooperation.

The issue on both sides - who has the major “rights” to the land and resources. The Uighurs say they do - they are native to that land (by maybe 500 years?). The Chinese say they have political and national ownership over that land - and they have been incentivizing Han Chinese to move there and tip the population balance from Uighur to Han Chinese for the last 30 years.

Here is an excerpt about the spread of ethnic Chinese in the region overall: “The Chinese presence in Central Asia has grown in recent years, especially in neighboring Kyrgyzstan and Kazakhstan. Trade between China and Kyrgyzstan — much of it exports of cheap Chinese manufactured goods — tripled between 2004 and 2006 (the last year for which data were available). What’s more, between 10,000 and 100,000 Chinese merchants and workers now live in Kyrgyzstan.

But the Chinese influx has become increasingly unwelcome, and resentment is growing among many Kyrgyz. “The migrant flow from China should be reduced,” one parliamentarian said recently. “There is a threat that in 15 years, the country will overflow with Chinese.”

this is from www.worldpoliticsreview.com