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China’s wealth

Bloomberg on March 4th: Wen Jiabao Sees Billionaires When Communists Convene as Wealth Gap Widens

Key Stats in the article: The richest 70 of the 2,987 members have a combined wealth of 493.1 billion yuan ($75.1 billion)… By comparison, the wealthiest 70 people in the 535-member U.S. House and Senate, who represent a country with about 10 times China’s per-capita income, had a maximum combined wealth of $4.8 billion.  Average wealth of top 70 members in China is close to $1bn, while in the US, it is close to $7mn.  And yes, it is US dollars, normalized already for currency. 

In China, everything can made it bigger, faster and quicker.  And building wealth is no exception!

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About 8 years ago, I thought that China needed some public relations help.  The West was not giving it any credit, and no one was quite paying attention.  While I spent a couple of years in business school, I founded a club that focuses on business opportunities in the Greater China region, with my eye in China.  I remembered having to justify why the club has a place for existence, and that it will have a lasting existence.  I remembered having to explain why we are not looking to start a Chinese culture club, but a China business club.

Then the Olympics came along.  I started writing this blog before the Olympics, and then I had a hard time keeping it up.  I was suffering from China exhaustion.  The hype was incredible – suddenly China was the darling of the world.  Look, they can get thousands of people dancing totally in sync!  But more importantly, look at how much money they have.

After that, we have the global meltdown.  Global ex-China.  Suddenly, China is not only interesting –  maybe, just maybe, they have it all figured out better than we have.  Perhaps democracy is not the best solution afterall.  Look, the Chinese can build highspeed railways overnight – they are clearly better than we are.  Even Obama said so.  The power of having autocratic control.  We envy.

I’m not suggesting that we need to start China bashing.  The ruling party deserves a lot of credit for moving the country forward.  And I do hope it will continue to do so for decades.  It is true that the majority of the people are moving forward in a way they have not experienced before.  I think, however, that both the Chinese  and the West are starting to make excuses for the Chinese government for unacceptable behaviors (in areas of human rights and freedom of speech).  It’s tolerable or even expected as long as the country is moving forward.  This has always been Chinese government’s argument.  That the sacrifice of a few is necessary for the good for the country.

For me, the pendulum is starting to swing the other way.

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This is a sad news indeed.  A Chinese company bought the Hummer brand and will be bringing this gigantic (ugly ass) car to China! 

I hate Hummers.  And especially Hummers in crowded cities.   In New York City, they even have Hummer limos which is the most obnoxious car in the world.  They literally take up the entire road when they turn. 

Hummer Limo

Who needs a car like this?!

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I came across this post by Michael Pettis on his analysis on why he thinks Chinese saves much more than the US.   There are multiple reasons listed, most of which relates to policies and how Chinese do not have a safety net, how the credit system is not in place yet. 

I think the real question is: why are Americans saving so little, and the Chinese saving so much? 

In my mind, there’s one simple answer.  Americans have formed the habit of spending their future projected earnings, and the Chinese have formed the habit of insuring their future with current and past earnings.   

Digging a layer deeper, Americans are confident that good and better days, will come while the Chinese worry that good days will not last.   

I agree with Pettis that the reason is not purely “cultural” but largely sociological.

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Wang JianShuo, as always, wrote a thought provoking post a few days ago, titled, “Why people don’t use v-mails in China“?  I have always pondered about this, as well as the question raised in his related post “Do you have a calendar“.

Wang’s perpsective is that Chinese people don’t use v-mails because they have leaped over the technology and adopted SMS and IM.  If the objective for using v-mails is to reach others when they are not reachable…  then the internet and mobile phones should have eliminated the need because (technically) everyone is now reachable 24/7. 

There is certainly merit to this argument.  I also agree with some of the comments on his blog that social ettiquettes also come into play.  While it is impolite in the US to take a phone call in the middle of a face-to-face meeting, it is impolite in China not to pick up your phone when it is ringing. 

The question then is, are these differences in ettiquettes shaped by culture, or by habit?   If we had mobile phones in the 70s and 80s, would we have voicemails today?  If we had IM and SMS in the 90s, would we use emails the same way we do?  I think not.  Just look at the teenagers today; with no legacy habits, their behaviors resembles those in China.

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The WSJ ran a piece this week titled “China Faces a Grad Glut after Boom at Colleges“.   This issue of oversupply of college graduates in China is not new… it has been written about back in 2006 here, and in 2007 here.  

Together with everything else in China, higher education has expanded at a rapid pace.  Here are the key statistics (from the WSJ article):

china-education

 

 

 

 

 

 

 

 

 

University enrollment in China 30% per year consistantly over the past 10 years.  This growth surpasses China’s GDP growth, and greatly surpasses growth of “white collar” jobs.  Today, Chinese universities churn out >6mn graduates every year.  I have heard that even in prestigious universities like Peking University and Tsinghua University, 30-50% of students will not land a job right after graduation. 

Some people argue that China needs to reduce its university enrollment so that more of the graduates can land a job.  Philosophically, I do not agree with this approach.  Education creates hope and economic/social mobility within a society.  At the individual level, it makes no sense to take the opportunity away.  It is easy to say that there is nothing wrong being a farmer or construction worker when we are not the ones doing it.   Having said, once given the opportunity, it is up to the individual to make the best use of it.

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Regional superiorities

I recently discovered Jenny Zhu’s blog which I find very interesting.  Jenny is the face/voice of Chinesepod, the language 2.0 company.  I was reading her post on “Language Snobs and Regional Superiority” and thought it brought up a few interesting observations.

Beijing and Shanghai are two of the proudest cities in China.  It is not unlike other major cities like New York or Hong Kong where being a native is considered a privilege.  While the official language in China is Putongua, native Chinese can tell where someone is from based on their accents.  The implications of this is huge – it is much harder for someone from an “inferior” province to make it in Beijing/Shanghai since they’re generally looked down upon.  In addition, Jenny pointed out a practical reason for discrimating against non-locals in business dealings – it is more difficult to trust someone who does not have local ties.   In other words, it is easier to fraud a stranger than a friend.

There is an excellent film, “Beijing Bicycle“, which touches on how a migrant teenage boy struggles to make it in Beijing.  It does a great job depicting the challenges he faces as an outsider.

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