|
|
MAKING CENTS OUT OF THE NEWS
Blog #39
(October 15th, 2009)
CHINA SYNDROME
By Tom McAllister, CFP®
It’s been just four days since I returned from Beijing, and, at 2:30 in the morning, badly jet-lagged, I’m contemplating the irony of having just watched, on television, the Indiana Pacers losing a pre-season game against the Denver Nuggets before a sell-out crowd of 17,000 fans - back in Beijing, where it is mid-afternoon. It seems appropriate, despite the hour, to compose this review my very recent five day visit in China.
This was my third visit to Beijing, the first being in early Oct. 1994 and the second in early 2003. The weather was quite good each time, similar to the typical Indiana fall. My impressions of the country are mostly positive, but stories about their smog are sadly true, reminiscent of Los Angeles area in the 1970s, only worse. Even early in the morning, from my hotel room I could see smog in downtown Beijing, and whenever I ventured outdoors, I would suffer from nasal distress, eye irritation, and a runny nose. Of the four Chinese cities I visited, Qingdao, Dalian, Xingang, and Beijing, Qingdao, right on the ocean, was worst, with Beijing a close second.
The economic progress that China has made since my first visit was very apparent. My 1994 memories include literally millions of bicycles clogging the streets, with some motorbikes, scooters, and a few private cars and buses making up perhaps 10% of the traffic. Then, six and a half years ago, I noticed the bicycles had been mostly replaced by motor bikes and scooters. On this visit, by contrast, I saw many cars and buses, with only a few bicycles and motorbikes traveling in their new special lanes. Beijing has become a thriving, modern city, reminding me of Manhattan. People get around by public transportation and taxi, along with private cars.
I noticed that tourist prices for hotels, excursions, food, entrance fees, etc., were 50% higher than they were six years ago, probably due in large part to a combination of the current weakness of the U.S. dollar and some residual effects from last year's Olympics.
In fact, for the past thirty years, China has experienced unprecedented, double-digit economic growth. This very year of 2009, with the world around it in recession, China estimates its Gross National Product growth at 9%. It is important to keep in mind that China’s economy is only one third the size of the U.S. economy, and that China has four times the population. 75% of the Chinese people still lives in rural poverty and hardly participates in their country’s “economic miracles”.
On yet another cautionary note in viewing China’s growth, it appears that Chinese banks (heavily influenced, if not partially owned, by the government) are making marginal loans to business borrowers. China’s banks are in the practice of refinancing not only the principal of loans, but the interest due. This form of “propping up” borrowers is not a good practice. Should the world economy make the hoped-for strong recovery next year, China should be fine; should the recession in China’s trading partner countries drag on, China may be in danger of slipping into recession itself.
All things considered, I was very impressed with China. Its hard-working and dedicated people continue to “pull themselves up by their bootstraps” year after year. Despite an extremely heavy-handed government, somehow the Chinese make things work!
|
| |
| |
______________________________________________
| |
Click To Print This BLOG
