Any comments about the latest FDI stats?

http://tinyurl.com/nj5duo

Carlo

1 – slight population dip anyway

2 – Unemployment amongst graduates

3 – The exam changed. So those who would normally have retaken the exam (cos they messed up last year) have not done so on the usual scale – the textbooks etc changed.

If I understand correctly, the typical age for the gaokao exam is 16-17. And China’s population pyramid does suggest a significant drop in the number of 16-17 year-olds (the pyramid I have at hand only shows a breakdown into five-year-brackets, but the current 15-19 year bracket appears to be much smaller than the 20-24 year bracket). So at first glance, the “there are simply a lot fewer teenagers around” argument sounds like a valid point.

Your interpretation of the People’s Daily article seems to be a little off – rather than “raising the rebate of export taxes by around 15%” the Ministry of Finance actually shifted the rebates up by about 8% on average.

Although the export tax rebate on some goods climbed to the maximum of 17% (i.e all of the export tax was refunded), other goods had a lower percentage of the tax waived. According to a report in this week’s Economic Observer, The composite rate increased from 12.4% last time the rate of export rebate was raised in April to 13.5%.

Summary of article referred to available here: http://www.eeo.com.cn/ens/Today_Media/review_print/2009/06/09/139702.shtml

When you say that the Chinese don’t have an “inherent” competitive advantage, I disagree. It’s partly a semantic issue, but one that I think is important to understand. The Chinese have a competitive advantage in that they are, at this stage of their development, willing to work more for less.

Let’s take the case of a Chinese exporter and his workers. Nominally, they are paid $100 for their services. But in reality, the economic cost is less. Ordinarily, the value of the USD would fall. But, at the micro level, they take the $100 and save almost half of it. Then, at the macro level, govt policy purchases US dollars to keep costs down for the US consumer. In other words, China does have a competitive advantage not because Chinese are inherently better at producing certain goods/services, but that some people are willing to work 10-12 hour days, then squirrel away their money to do effective vendor financing and fund top-rate infrastructure (billions for coastal ports, but how much for rural healthcare?). My point is that where you see some of this “inherent” competitive advantage implemented is at the macro level.

Of course, it is also obvious (as you have pointed out) that macro policy also influences micro behavior. But I believe it is like most chicken-and-the-egg problems — it’s nearly impossible to say that one “causes” the other but as is often the case, both micro and macro go hand in hand.

Certainly, the key takeaway is that government policy NEEDS to shift and indeed HAS artificially boosted household savings rates, BUT I believe the savings rate would still be high if you note the cultural ethic and savings mentality of your average Chinese household.

I hope this has not been a mindless exercise in semantics.

-Randy

i met you several times in Beijing back in 2007/08, albeit very briefly.

Was interested in the hunch that Gaokao numbers have fallen. We really need some good quant analysis on this. However, there are alternative theories on why the rate has dropped.

1970 saw the intro of the “late, long, few” policy, the voluntary pre-cursor to the birth control policies enacted in 79/80. Interestingly the govt suggested that the number of gaokao students is set to fall further next year (by almost twice the amount it has fallen this year). However, the Chinese are nothing if not meticulous and its hard to believe they would miss something like this.

The other is that, with much lower exchange rates, many students could be looking to get a cheaper degree overseas. Though it is hard to see an extra 300k students applying to UK, US, Canadian, EU, OZ&NZ uni’s (but possible that this explains at least some of those).

I just cannot buy this argument based on high graduate unemployment.