Everyone knows that China has been under pressure for years, led by the US Congress, to allow the value of its currency, the RMB or yuan, to appreciate. But the “weak” RMB that hurts American exporters is not likely to be the main issue of concern to American voters. They’ll be more worried about $4/gallon (or higher!) gasoline. And this (Chinese article) is a big reason why. China has price controls on diesel and other fuels, such that there is now an RMB6000 (US$870) disparity between what a ton of diesel goes for in China and what it goes for abroad. Chinese oil refiners like Sinopec are getting slammed, since their costs are rising but the sale price of fuel is controlled by the Chinese government. The government is responding with measures to import more oil to help ease pressures.
Why does China control prices? Well, it’s obviously a good way to spur growth, and it’s been working as the country has been growing at 10%+ for over a decade. It’s also a way to over pollute the country and congest the roads. And it’s contributing to the skyrocketing oil prices worldwide, since 25% of the world’s population, the Chinese, are paying a lot less for the oil they use than everyone else. SHTig adds (5/28 6:50pm PRC time): Mul called to ask what this means, and nator commented below also asking for clarity. To answer – yes, China buys oil on world markets at prevailing prices. But then, when that oil is sold domestically it is done so at a price lower than the prevailing world price. The government forces Sinopec and others to sell it on the cheap, and makes up for this by subsidizing Sinopec with the difference. This process allows everyone in China to get oil in all forms for less than the ‘true’ price, which results in more oil being consumed in China than what should be. We expect consumption to be inversely proportional to price – and when prices are kept artificially low, consumption is artificially high. With oil consumption artificially high in China, China demands more oil from the world markets than it should from an economic prospective and this is what adds to the upward pricing pressure on oil.
If your taxi driver had to pay the prevailing market price for gasoline, your taxi flagfall would be higher than RMB 11 (as it is in Shanghai), and you’d pay more per kilometer. The ride might cost you 50% or 100% more, and at the margins, some people would opt to take a bus instead. Multiply this behavior by 1,300,000,000 and remember that China is the world’s workshop, and we’re talking about a lot less oil being used, if only they – the end users – paid the prevailing price. That would reduce global demand and thus the price of oil as well, ceteris paribus.
Wonder if John McCain and Barack Obama will talk about this when asked what they plan to do about $4/gallon gasoline? If Chinese consumers paid the same price for fuel as everyone else, it might serve to put them on the same competitive playing field as other countries, and it might also serve to increase efficiencies within China.
An interesting article by the Indian Defense Research Wing (click here if you are surfing from China) comments on the threat that China may or may not be posing to the Russian aircraft industry by a copied Sukhoi-27, now manufactured in China.
The article goes on to describe the history of China’s military aircraft industry and how it lags behind the west by some 15 years.
Chinese leaders eventually resolved to rectify the situation by purchasing up-to-date aircraft production technologies. In 1988, China bought production forms and records for Israel’s Lavi multi-role fighter. Sixteen years later, in 2004, China mastered production of the Chengdu J-10 – an essentially Israeli warplane featuring Russian avionics.
The sale of the J-10 to Iran would constitute a betrayal of Israel’s extensive aid to China’s military modernization efforts during the 1980s and 1990s. Originally encouraged by the Carter Administration in the late 1970s, in the effort to encourage China’s strategic tilt toward the West and against the Soviet Union, Israel sold China a wide range of army, electronic, naval and aerospace technology.
… when the U.S. and Europe placed arms embargoes on China, Israel refused to follow suit. Many Israeli officials supported continued military technical sales to China not just to make profits necessary to fund future military products, but also because they felt that such sales would persuade China not to sell advanced weapons to Israel’s enemies.
The NY Times provides a good story today on increasing car ownership in China. Most interesting part of the story? No, not the part about the explosive growth of the Chinese car market. And, no, not the part about wider segments of society gaining the ability to make large purchases like a family car. The best nugget (word trademarked by SHTig) is that Geely manufactures a car called the “King Kong“.
SHTig Quick Translation: Important Information: The French government is preparing US$ 20,000,000, and Carrefour is preparing US$5,000,000 for a May 1st sales promotion. It’s said that Carrefour’s senior management is insolently planning to cram pack its stores on May 1st with Chinese people, with the hopefully result of causing some people to be trampled to death. French television is also actively preparing to record the mad rush of Chinese shoppers at Carrefour stores, to show Chinese people smashing each other up.
If you are a patriotic Chinese, send this information to your friends and family, and don’t go shopping at Carrefour to chase some tiny discount that will cause loss of respect, national spirit and will make the foreigners laugh. We can’t let the foreigners once again make us the sick men of East Asia. Even though our efforts might turn out to be negligible, by us all uniting together it will show our strength to the foreigners. Good hearted Chinese people please send this to 10 friends.
SHTig’s Quick Comments:
1. I don’t believe this in full, especially the ridiculous part about trampling and wanting the Chinese to lose face. I did go shopping at Carrefour on April 13 in Shanghai. They had a very good promotion running (spend RMB500 on select items, get a voucher for RMB250 to be used within April). April 13 was a Sunday. The store was crowded, but not nearly as it usually is. The checkout line was shorter than normal. Anecdotal.
2. This note has an unnecessary pandering tone to “the foreigners” as it is. Are any of us foreigners really that important?
3. Carrefour is an unfortunate target in all of this (as is the Olympic torch). Can someone tell these petitioners that Carrefour is not a State-owned enterprise, so attacking it is not akin to attacking the French government?
4. One thing is universal with these spam requests — no matter what the language, they beckon you to forward them to others. Would be funny if they had added “send this to 10 people or else your daughter will hook up with a laowai”
NATOR ADDS: I got this letter, with ” 爱国的中国人转发50个 ” (“Patriotic Chinese people please send this to 50 friends”) added to the last sentence.
Pacific Epoch is one of the best English financial news sites in China. I strongly recommend subscribing to their daily news summary (you can do so from their home page).
Market Avenue provides a very similar service–in fact, almost identical. If imitation is the sincerest form of flattery, these guys are extremely sincere. Even better, they have provided a graphical representation of their “sincerity” in the above chart, which comes from this page. As best as I can tell, the “H” in the chart is Market Avenue, and the “Exemplar” is Pacific Epoch. At least they’re honest that they’re weaker in every single area.
If you have come across similar “sincerity” on the web please share it with us.
WUHAN, March 15 (Xinhua) — A five-year pig raising project involving 1.36 billion U.S. dollars in investment launched on Saturday in Hubei, making the central China province the nation’s largest pig raising base.
China National Cereals, Oils and Foodstuffs Corp.( COFCO), the country’s largest oils and food importer and exporter and leading food manufacturer, started the project in Wuhan, the provincial capital.
There’s plenty of information out there on the Darkie/Darlie story–check out Danwei and Sinosplice, for example. I had no idea the brand was so old, though. Check out this Late Night with David Letterman clip (the Darkie reference is several minutes in, but the whole clip is enjoyable, so just watch all of it):
However, the Chinese name of the brand, 黑人牙膏 (in English, “Black Man Toothpaste”), has not changed; a Chinese-language advertising campaign reassured customers that “Black Man Toothpaste is still Black Man Toothpaste”. This is because the term 黑人 does not have any negative meaning in Chinese. The phrase 黑人 (hēi rén) in Chinese is a general term for persons of African descent.
While in many cases heiren carries no negative meaning, in many other cases it does. In the latter usage, it’s somewhat analogous to the term “Chinaman”, which Wikipedia admits is both neutral and offensive in meaning, depending on who you ask.
A subject of debate for over 20 years, the Chinese government finally kicked off construction on a multi-billion dollar, multi-year project to build a high speed railway between Beijing and Shanghai. Expect to cost a whopping $21 billion, the project is scheduled for completion by 2013. Traveling at a speed of 350 km/h, the approximately 1300 km journey will be cut from the current 10 hours to about five hours.
I’m not opposed to the project, but I am curious what argument was most persuasive to the decision-makers to justify the cost. Green considerations, like reducing carbon emissions with fewer flights? Increase passenger capacity on a crowded route? It strikes me as a large amount that could perhaps be directed elsewhere.
Engadget and The Financial Times are reporting that Apple and China’s leading mobile phone company, China Mobile, have called off negotiations to introduce the iPhone into the Chinese market. The rumor is that China Mobile balked at Apple’s revenue sharing demands. Cingular, T-Mobile, O2 and Orange came around to Apple’s way of thinking on sharing revenues from the popular iPhone, but not China Mobile. Back in November, China Mobile’s CEO labeled the iPhone “not suitable” for China.
Judging from the popularity of gray market imports of the iPhone in Beijing and Shenzhen (based on my own unscientific visual survey) this could be a big boost to smaller rival China Unicom if they are able to come to terms with Apple.
