Category: China

Biden and the Democrats try a Great Leap Forward?

by philg

The Fall and Rise of China, a course by Richard Baum (late professor at UCLA), has an interesting section on the Great Leap Forward (1958-1962). Essentially the Chinese economy didn’t produce enough to give the government the resources that was required to meet the leaders’ objectives. Without any analysis or claims that the measures they were taking represented a likely optimum, the government introduced one policy after another in hopes of increasing the amount of money flowing into the capital. The Chinese Great Leap Forward had a big emphasis on infrastructure, albeit not subsidized child care as “infrastructure”, but dams and other massive civil engineering works (these ultimately proved to have been poor investments).

The parallels aren’t perfect. Mao was trying to create a society in which every able-bodied person worked; the U.S. is a work-optional society in which ever-more people can get paid for not working (child support plaintiff, means-tested housing/health care/SNAP/Obamaphone beneficiary, alimony plaintiff, stay-at-home parent, SSI or TANF recipient, 1.5-year unemployment check recipient, etc.). Americans these days get upset when they hear about powerful people having sex with the less powerful; according to the professor, Mao, then in his 60s, partied with teenage girls every night (bedroom with oversized bed (since multiple teenage girls would occupy simultaneously) next to a dance hall).

The high-level picture seems similar. The proposed corporate tax rates are not being set based on the idea that they will lead to a optimum balance of economic growth, competitive positioning with respect to Europe, and revenue for the government without discouraging effort and investment. The new rates are justified with “we need the money”. We’ll assess capital gains tax against people with $1.0001 billion in assets, but not those with $0.99999 billion (it would be a lot simpler just to eliminate the charitable contribution deduction so that the super rich couldn’t avoid taxation by stuffing money into foundations).

Readers: Do you think there is a parallel here?

(Also, if the federal unrealized capital gains tax on billionaires goes through, why can’t the billionaires simply move to Puerto Rico for 183 days per year and pay 4% income tax instead? Could it be that this is the way the Democrats pull Puerto Rico in as the 51st state? If all of the billionaires move there to escape the new 20 percent haircut (and why won’t California add 13 percent on top?), isn’t the most obvious solution to make P.R. a standard part of the U.S. and therefore subject to conventional federal taxation? Or maybe the Feds will say that the tax still applies even for those who flee to Puerto Rico because the gains happened while the targets of the tax were still living within the 50 states.)

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Wrong again: Chinese-built RVs are not cheaper

by philg

Me in 2005: “Ideas for Building RVs in China”. I figured that the Chinese would be able to build competitive basic motorhomes at prices lower than what American firms charge because so much hand labor is involved.

(On the blog post associated with this, a reader was way ahead of the curve:

I think you are drawing the market too narrowly by saying that your product is “Intended for a married couple with two children to go camping.” What about shooting for a market that includes “a family of four to go camping”, which could include gay and lesbian couples and their kids? I would think they would be equally, if not more, likely to want to camp (a gay friend of mine recently spent a weekend at a “gay” campground in Texas) as straight folk. However, they would not fall within your “married” categtory because they are not married, due to homophobic folk in their home states who fear that to permit that would lead to the demise of the straight marriage. Please excuse the brief political rant, but my main point is, no need to target such a narrow market.

Today she would be considered a hater for not including the trans and other folks within the LGBTQIA+ rainbow?)

Instead of same-but-cheaper, it looks as though the Chinese are innovating in ways that Americans couldn’t have imagined, but the prices are actually higher. See “An Entire Second Floor Pops Out of this Tiny RV, Complete with a Working Elevator to Get Up There” (Gizmodo):

The SAIC Maxus Life Home V90 Villa Edition, designed and built in China, appears to offer the best of both mobile worlds. The vehicle has a relatively small footprint (it’s only slightly larger than what you see most van-lifers driving around in), but it employs slide-out walls to greatly increase the floor space to around 215 square feet inside while the RV is parked. There’s a fairly spacious sleeping berth located above the driver’s cab which leaves more room in the back for a large L-shaped couch and a respectably sized kitchen. … Where the V90 really wows, however, is the sunroom that automatically extends from the roof giving the RV an entire second floor of living space, including a walk-out balcony.

You can potentially convince SAIC Maxus to build one for you if you’re willing to cough up a little over $413,000, and whatever shipping costs are needed to export it outside of China, plus whatever additional upgrades are needed to legally drive it on US roads.

Here’s a photo:

(Should the gal above be a little more, um, robust in order to fit in with the typical American RV traveler?)

A similar-length U.S.-made Winnebago is about $172,000, i.e., less than half as much. So it seems that I have been proven wrong yet again.

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A $5000 electric car

by philg

One of my worst predictions ever was a 2003 forecast that, by 2023, the Chinese would be able to sell a basic car for $3,000 in 2003 dollars (about $4,300 in today’s money, adjusted via the BLS CPI calculator). I further thought that Americans, instead of burying themselves in debt to buy a needlessly fancy car, would get around in these $4,300 cars.

The market has moved in the opposite direction, with cars over $40,000 being average (USA Today).

Perhaps there is hope, though! “Tesla’s Nemesis in China Is a Tiny $5,000 Electric Car From GM” (Bloomberg):

The Hongguang MINI EV, made by SAIC-GM-Wuling Automobile Co., is currently the hottest EV in China, the world’s biggest automobile market. Sales of the compact four-seater beat industry giant Tesla Inc. in August, with consumers wowed by its tiny price tag — the EV retails for between 28,800 yuan ($4,230) and 38,800 yuan — and its ability to run for as many as 170 kilometers (106 miles) on a single charge. Orders exceeded 30,000 units in just 50 days.

“A lot of consumers don’t need anything fancy, a commute is all they ask from a car,” said Yale Zhang, founder of AutoForesight, a Shanghai-based consultancy. “I’m all for a product like the MINI EV.”

Maybe by 2023 this will be improved? It already has a top speed of 62 mph, according to Wikipedia. That’s nearly double my proposed speed limit that will keep Americans safe.

The interior:

The exterior:

The commercial..

With two more years of Chinese-speed innovation, why wouldn’t this be a good car for Americans?

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China will close its borders to Americans soon?

by philg

Right now we’ve tried to close our border with China. The US State Department says don’t go there. Airline flights have been cut back.

Yet what if the widely mocked Chinese government turns out to have been the only example of taking effective measures to stop the virus from spreading? China will soon be free of coronavirus while a pandemic rages in most of the world’s countries (thinly populated Finland escaped the 1348 Black Death, but they’ve already suffered from COVID-19).

A Japanese friend based in Shanghai told me that the Chinese are beginning to establish quarantines for visitors arriving from South Korea and Japan (confirmed via Reuters). When do they say that Americans aren’t welcome or have to be in a dog kennel for two weeks?

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Chinese perspective on American Presidential candidates

by philg

Some photos from the November 2019 trip to Shanghai…

Folks there love our Democrat-turned-Republican President so much that they named a car after him. The Trumpchi:

Pure Democrats aren’t forgotten either. Shanghai has a substantial monument to Bernie Sanders and Elizabeth Warren:

Happy Super Tuesday!

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Netflix: American Factory

by philg

American Factory won the most recent Oscar for Best Documentary. You’re already paying for it so you might as well watch it on Netflix!

The level of access and candor is comparable to what you would see in The Office, but in a real workplace, mostly the Dayton, Ohio factory opened by Fuyao, a Chinese automotive glass manufacturer.

There are some great scenes in which Chinese and American cultures meet, e.g., an American hosts 13 Chinese guests for Thanksgiving with a huge turkey and ham, plus lots of backyard pistol and shotgun shooting.

The factory had been a unionized GM plant from 1981-2008. Fuyao invested $500 million to re-open it as a glass factory in 2016 (investment eventually totaled $1 billion). The opening ceremony hits a rough patch when Senator Sherrod Brown (D-Ohio) comes to speak about how all of the workers should unionize and take back what is rightfully theirs. This is later echoed by an Ohio state rep. Both of the politicians who appear in the movie are huge advocates for unionization despite the fact that they watched the unionized GM jobs migrate south and/or offshore.

How does it work to hire an older heavier heavily tattooed workforce? Not profitably at first. Chairman Cao: “American workers are not efficient and output is low.” He’s a regular cheerful hard-working guy who founded the company in 1987.

Americans are sent over to China so that they can see how a profitable line runs. At least one is too fat to fit all of his tattoos under the provided safety vests. The Chinese plant is like a ballet compared to the American plant. Workers are young, slender, and don’t object to their 12-hour shifts. If opposite sex workers fall in love, they get married at the big New Year celebration. (Same-sex marriage is not available in China and single parenthood is illegal, but that doesn’t mean they’re not celebrating a rainbow of love. YMCA was played at the factory New Year party. There is also an awesome company song, a hymn to transparency.)

(Can Chinese factories deliver Western quality? See this Car and Driver article on the Volvo XC60.)

How to explain the difference in output and quality? An American fluent in Chinese says to a counterpart in China: “Most American workers are there to make money, not to make glass.”

The biggest disappointment, however, turns out to be in the high paid American managers who proved ineffective and disloyal in the chairman’s view. They are fired and the new Chinese president who spent half his 53 years in US explains to the young Chinese supervisors that Americans shower children with praise and that’s why the resulting grownups are all overconfident. He reminds the Chinese overseers to keep praising the American line workers just for showing up.

Big drama in the film is provided by a United Auto Workers unionization drive and election. There are enough disgruntled workers to generate some negative publicity on unsafe conditions and excessive demands. The company spends $1 million on an anti-union consultant. The chairman comes over, surveys the middle-aged whiners, and tells subordinates to hire some young people. A Chinese furnace expert who is there on a two-year knowledge transfer stint says, regarding the union idea: “one mountain cannot hold two tigers.”

Eventually, the company is able to stop the red ink from flowing. A key part of that seems to be installing robots to do the stuff that Chinese workers can do quickly, but Americans cannot.

If you’re interested in business or China, you should see American Factory!

Presumably reflecting Americans’ lack of interest in numbers, the film never tries to explain why Fuyao wanted a U.S. factory. Why not build an additional factory in China and ship the output wherever in the world it is needed?

Chairman Cao explains in this interview:

First of all, China had a VAT tax, and the United States did not. Secondly, labor costs in the United States are very high, accounting for 40% of the operating cost, whereas in China it only accounts for 20%, but the proportion of insurance paid by Chinese companies was very high. Although labor costs are half as expensive domestically, we calculate that in our case we were nearly 4% more expensive than the United States, plus the VAT for auto glass, which is around 12%. Third, the American energy prices were lower than China’s. The price of natural gas there was one-fifth that of China’s, electricity was only 40% of China’s price, gasoline cost only half of what it did in China, and the cost of transportation and logistics were relatively low. These inputs made the price 4% to 5% cheaper, so the overall calculation made production 16% to 17% cheaper. Moreover, if I shipped the glass from China to the United States, the freight costs would increase by 15% to 20%.

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Boots on the ground in Shanghai

by philg

… actually it might be more accurate to say “boots in the apartment”. I have been WeChatting with a friend who is a professor in Shanghai.

Her university is planning to start classes two weeks late, on February 17, and restrict them to online-only through March 15. Staff were given a holiday through February 10 “but all of our admins seem to be working very hard from home.”

What about food?

Malls are generally open, but only a few of the stores and even fewer restaurants in them are open. They have only one entrance open, with someone checking forehead temperature. Supermarkets, both in and out of malls, are open. About 25 percent of the food stall markets are open, a higher fraction for those that specialize in fancy fruit (popular New Year gifts). Several grocery and restaurant delivery services are working. Almost no other retail open.

Our know-everything-about-China media suggests that the Chinese response to coronavirus has been weak and that an American-style government could have done better, but this sounds to me stronger than anything the U.S. has ever done to try to contain a flu epidemic. The U.S. seems to have responded to the last big one (swine flu) by stockpiling antiviral meds for people who got sick (source). I don’t remember much being done to prevent the virus from spreading.

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Tesla proves that it is easier to deal with government of China than government of Michigan

by philg

Annals of free markets #7231… “Tesla Model 3 floodgates open in China next week” (CNET):

Now, with local production in Shanghai, Tesla can skirt the ongoing US-China trade war. The occasion is also monumental for a different reason — Tesla’s Chinese factory is one of the first solely owned by a foreign automaker.

How are things back here in the Land of the Free (market)? Wikipedia shows that Tesla is restricted or banned from selling its products in 20 out of 50 states. It is banned from servicing its vehicles in 5 out of 50. “Our Tesla Model 3 Suffered a Catastrophic Failure While Parked” (Car and Driver):

… he received an ominous push notification from the Tesla app that the car had “suffered a failure and will no longer drive.” … it’s also an extraordinarily rare case of any car leaving us stranded, something unacceptable for any new vehicle, particularly one that costs $57,690 and with merely 5286 miles on the odometer. … even on Christmas Day, Tesla roadside assistance got a tow truck to us in about a half hour, which brought the car to the closest service center: Toledo, Ohio, because Tesla isn’t allowed to operate company-owned service centers in Michigan.

After a two-day wait, we were informed that there are issues with the rear drive unit, the pyrotechnic battery disconnect, and the 12-volt battery and that they are waiting for parts.

Separately, another recent Car and Driver article has a calculation by Mazda that its own modest-range electric car only emits less CO2 than a diesel-powered version after the car is driven at least 50,000 miles. It looks like a Tesla with a big battery would have to go 200,000+ miles before there was a net reduction in CO2 emissions compared to an efficient petroleum-powered car.

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Chinese face recognition system and air pollution masks

by philg

As part of the U.S. campaign to make sure that no country interferes in the internal politics of another country, “China’s ‘Abusive’ Facial Recognition Machine Targeted By New U.S. Sanctions”:

It has been coming, but the decision by the U.S. government to add a further 28 Chinese entities to its Commerce Department blacklist will still come as a shock. And the headlines will be dominated by the fact that in amongst those new additions are China’s leading AI surveillance unicorns. In short, the U.S. has just blacklisted China’s facial recognition industry, citing “human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups in Xinjiang.”

There may not be a good answer (except that Americans are always right?) to the question of what weight to assign security from jihad versus personal privacy. Certainly the Chinese are less willing to tolerate the risk of incidents such as the following:

  • Boston Marathon bombing (jihadists would not have been admitted to China because they generally don’t admit refugees or asylum-seekers as immigrants)
  • 2015 San Bernardino attack (would not have occurred in China because Syed Rizwan Farook’s parents would not have been allowed in as low-skill immigrants)
  • Orlando nightclub shooting (Omar Mir Seddique’s parents similarly would not have been admitted to China as immigrants)
  • 2017 New York City truck attack (Sayfullo Habibullaevich Saipov would not have been admitted to China as a low-skill chain migrant)

They’re also less willing to tolerate the kind of street crime and violence that Americans in Baltimore, Detroit, New Orleans, etc. accept as inevitable.

Let’s ignore this question of how a society should balance privacy versus security for the moment and think only in terms of practicalities. In a country in which the wearing of masks to filter out air pollution is common, how can a surveillance state based on facial recognition work? Anyone who doesn’t want to be recognized can simply don a mask, no?

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How to get rich in China: open a CVS clone

by philg

Merry Christmas Eve.

Suppose that you’ve been procrastinating or away on a trip. Your house is not decorated. You have not purchased any gifts. You don’t have any gift wrap. You are out of milk. You need a prescription refilled. You need a toothbrush and some shampoo.

Live in the city? Walk a maximum of 4-8 blocks to the nearest CVS (or Walgreens), likely open 24 hours. Live in the suburbs? Drive your pavement-melting SUV to the CVS that is 10 minutes away (maybe 20 in traffic?).

Suppose that you live in Shanghai, a city within a metro area with 35 million residents. Where’s the CVS or CVS-like store? Nowhere! A local friend said that Watsons was the closest, but it is more like the makeup section of a CVS. Note the lack of density in the photos below. Note also the air pollution mask section. (Also that the cash registers are at the back of the store; China seems to lack most of the anti-shoplifting measures that retailers have applied here in the U.S.)

(Also note the gender binarism in the restroom signage for the neighborhood mall in which this Watsons resides and the pedestrian overpass for the busy adjacent road.)

A Shanghai resident could likely get everything he/she/ze needed within less than an hour via delivery. Yet I think folks there would appreciate the serendipity of shopping in a CVS-style store.

For those who complain that the Chinese are trashing the planet via greenhouse gas emissions: Shanghai is actually saving the planet via government regulation. If you don’t bring your own bag, the merchant is required to charge you 5-10 cents for a plastic bag (as in the U.S., the result seems to be thick high-quality plastic bags, perhaps resulting in more energy use).

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