Feb 6 UPDATE–Like I said. “6.8% growth might as well be 0.” And guess what? It actually was (more here)!
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I purposefully tried to avoid Asian news for the CNY Holiday. A change is as good as a break, right? It was nice to spend some time both in the US, at shows, and in a little Chinese village to gain a perspective other than President Obama’s Depression forecasts.
Back in the saddle, while discussing the recent events with a number of other friends of mine with connections to Thailand we commented on the fact that for Westerners the single most under appreciated or misunderstood concept in Asia, in business or politics or otherwise, is probably the concept of face and the corresponding reciprocal social relationships.
In Thailand, the library of academic literature is overwhelming on this—and current politics support it all. A bit further north, I’ve read about a lot of theories about motivations for business success in China, but there isn’t one that, I think, is more powerful than the issue of face. Sure the desire to be rich is a driver for everyone. Yes, people want to be both safe and provide for their next generation. Conspicuous consumption of wealth, which is a superficial express of the larger “face” concept, is certainly a motivator for many. Even nationalism has been, more so in the past I think, a minor motivator to getting rich. (I don’t see nationalism really motivating many anymore, without a actual physical threat. In China the hatred for Japan is dying. The Olympics are over. Many, especially in China’s cities, certainly no longer see the West as evil; East-coast China just isn’t that oppressed any more. And those in inner-China never really cared.)
But back to face, I usually get a major lesson in face a couple times each year. Just when I’m feeling comfortable here, I get hit with a comment or an issue that puts my business (or even personal) interests in direct and glaring conflict with someone else’s face. Often times it’s one of those “Ah ha” moments where I finally see through the circular logic and see that the central issue is not what I’ve been focusing on (usually the bottom line of time or money) but something more personal, for lack of a better term.
What’s going on in Thailand is not that simple, to be sure. But so much of what is happening now is the continuing retribution for the loss of face and power from Thaksin’s (certainly corrupt) reign earlier this decade. It seems that in the past 6 months, if we’ve learned anything, is that what’s best for Thailand is not necessarily what either faction really wants. Not that Thai politics are unique in this regard, but in Thailand it has become blatantly obvious that “restoration” of the pre-Thaksin power structure, in the Name of the King, is the singular priority for much of Bangkok’s elite.
From the continued inept handling of the unrest in the South, to jailing of foreign authors (who printed 50 and sold only 7 copies) for les majese, to the in ability to resolve boarder issues with Myanmar and Lao, to boarder slap-fights with Cambodia, to the military hauling refugees out into the middle of the Indian Ocean and leaving them, to the physical occupation of the BKK airport, there seems to be no limit to the willingness to sacrifice what’s best for Thailand for political and/or economic advantage.
Really, if you want to get into the heads of your Asian counterparts, study their motivations—focus on personal relationships and responsibilities that may seem extraneous to “business” interests and you’ll start to understand what is driving business on the other side. This isn’t a criticism or critique—it’s just how it is for many many people in East and Southeast Asia.
One last comment on Thailand. I’m willing to bet that there will be blood in the streets of Bangkok after the death of the King and sometime before or within the first year of the reign of the Crown Prince. He is not liked or trusted and does not have the resume of his father. He is coming into power at a time where the perfect visage of his God-King father has been cracked for the first time. And very publicly too. His mother has alienated half of the country with her attendance at the funeral of the boy killed in last year’s protests and so much of the (generational) respect and good will she could have passed on to her son will now not transfer. His beloved sister, not the Prince himself, manages the Thai-China relationship, arguable Thailand’s most important relationship now. The country, very similar to the US, is now divided into distinct and very polarizing camps but does NOT have a history (despite their Buddhist roots) of peaceful dissent or conflict resolution.
Thailand has over and over failed to implement true independent government and judiciary. There is, unfortunately, no reason to think they will be successful on their next opportunity either.
Now on to China and the debacle that is Western governmental economic policy.
If you didn’t know it before, don’t believe the press coming out of China now. China will NOT save the rest of the world (and not because we are committed to destroying ourselves in the name of “hope” and “equality” either). Mr. Hu is pretty flashy on the world stage in Europe this week, but let’s put his pride into a bit of context.
6.8% growth is certainly much better than the US retraction of about he same 6%+ to be sure. But the US economy, even with the permanent loss of trillions of dollars of wealth, is still more than three times as big as the Chinese economy and with only 1/5 of the population. The US lost the equivalent of the Indian annual economy in one day last fall and was still twice as big as Japan. I don’t say this as mater of pride, but just as a matter of context—the US economy for the last 50 years has, in general, been mind blowingly huge. I think that we just take this for granted.
The Chinese economy was at 6.8% for the 4th quarter of ’08—but that might as well be 0. Why? Because anything less than 8% spells social unrest. And you know the books are cooked to make the numbers look better than they really are too. CNY this year was quite at home, in Jiangxi, and much busier in Shenzhen—meaning people didn’t go home. There was no traffic on our cross province drive either.
Other indicators: Higher numbers of laid off labors than expected. Exports are down 40%. Luxury goods purchases are down 30%. Auto sales are down up to 20%. Expenditures for Chinese New Year are estimated to be about 30% of last year’s total too. This is CNY spending is nothing to shake a stick at either—typically CNY represents as much as 40%+ of many industries annual income! How do luxury stores that are empty all year survive? CNY.
The Chinese economy, rather than being a savior, is actually dragging down other export-oriented neighbors like South Korea and Hong Kong. The NYT ran a class/race envy piece this week talking about how 400 rich Chinese people couldn’t tour the US to buy houses on auction and how Mainlanders were pouring into HK to buy gold and diamonds—no numbers, just cute stories. But not only is this just the annual CNY story that we see from the uninformed US press every year, but the “flood” of mainland buyers into HK didn’t even make up for the drop in spending by local HK buyers. Total sales of gold and diamonds are down over 10%. That’s right—hundreds of millions of rich socialists couldn’t out-spend 8 million capitalist former English colonists. Two can play the spin game.
Side Note: Let me say this, if I had to praise one leader, either Mr. Hu or Mr. Obama, for the handling of the crisis so far, my vote, hands down, goes to Mr. Hu. Mr. Hu is specific and proud and has knows how to at least play the role of leader (i.e. sounding hopeful, positive and optimistic). Who is writing the text for Obama? Could his press conferences and public statements be any more dire, negative and (ironically) completely HOPELESS?! I understand Obama’s need to manage expectations, but his words and positions so far not only lack of faith in America but come off as classless, boarder line dishonest, political to the hilt and certainly not helpful (unless you are trying to justify more govt spending…..hmmm).
So is the Chinese Economy going to continue to be slow or get better? Growth in ’07 was 13%. ’08 is expected to come in at around 9% and predictions for ’09 are ranging between 5% to 7.5%. Even the Chinese government doesn’t have enough cash to raise their growth numbers 2-3 percentage points with public works projects. But I will say this, the very impressive thing about China is the fact that they will keep themselves afloat, at all costs. Give them props for having their priorities straight and their financial house (mostly) in order.
China will continue to be in positive numbers, but scarily low for controlling social unrest. And the numbers will continue to be higher in print than they are in reality. The Chinese people will, in the East continue to make less and less in comparison to 5 years ago. There will be HUGE movements of industry into the inner provinces as experienced workers stay home and infrastructure and incentives improve.
If the recession in China, e.g less than 7% growth, continues into 2010 there will increasingly be more control exerted over the economy and especially international exchange and funds transfers. Control of the media and the currency will continue, regardless. Of course, currency manipulation always helps one’s own economy and numbers and that will continue.
Now I’m not saying that China’s currency manipulation is the reason for the US economic problems, but the artificially strong currency is certainly helping ONLY China. So here’s a challenge to China: If there truly is no currency manipulation by the Chinese, Mr. Hu, then why not let the RMB float? If Chinese officials are truly so confident about the strength of the RMB, then put the Yuan where your mouth is, Mr. Wen. Take the lead of the world economic recovery, prove once and for all the dominance of the Chinese system. Step away from the mic and let the economy speak for itself.
Regardless of the value of the RMB, the sad reality of China is that domestic strength in the Chinese economy simply does not translate into external stimulus for Western Economies. Sure the Airbus deals make a small dent, but these orders are not the bulk of foreign transfers of wealth or FDI—something that China is not known for anyway.
Chinese do save 30% of their income, but you have to remember incomes are relatively low—middle class in China is $9,000 to $18,000 a year. 30% of that is nothing, even if you do multiply it by 200 million. All this money is either saved in mattresses or spent locally—cars (mostly domestically manufactured), houses, and Chinese New Year gifts of food, clothes, jewelry and entertainment. The Chinese economy is not like the US where EVERYTHING you see in your local Wal-Mart is imported from some other country.
Finally, my favorite quote from a Chinese friend this last week: “Obama is crazy! He’s just copying what China used to do. He’s trying to be socialist.” Yup—can everyone but Americans see this?
What prompted this comment? The news about the White House wanting to limit CEO bonuses for bailed out companies—“just like what China did with their SOE’s,” said my friend. The unspoken reality of socialism, that Chinese willingly admit but westerner academics do not, is the fact that socialism makes everyone equally poor, not equally rich. Where are the China SOE’s and their employees now and where will US companies (banks, auto manufactures) be in the future? Either completely dead, sold to for-profit foreign businesses or losing money just to keep people employed to stop social unrest. Hello, France! Just because China has cash now and the West is a huge mess does not mean that socialism works. In fact, I think that China is Exhibit A for socialism NOT working. If you think that China in socialist in anyway but in name, you’re wrong. “Socialism with Chinese characteristics” is not socialism. It’s a capitalistic totalitarian state—the best of both worlds; money and power with minimal (relative to 30 years ago) social responsibility. The US is now trying to both gut capitalism and increase governmental social responsibilities at the same time—even if you are fine with this direction, please tell me who’s going to pay for it?!
And here’s a reward for reading that whole thing (or at least scrolling down to the bottom)! America is now China’s “business bitch.” Listen to “China Please” for a great laugh (unless you’re from Taiwan, then you probably won’t like some of the lyrics)! The page automatically starts playing the first song on the play list–China Please is the last song–just click on the text.
Other News and Blog Links I found interesting this week:
Asia Sentinal
CFR
China Wall Street Journal Blog
CN Reviews
China Solved
China Supertrends
China Vortex
For sale in China
Caijing
CFR 2
Asia Times
The Economist
BBC 1
Asia Times 2
The Economist 2
Tags: Business, China, Culture, Politics, Thailand by David Dayton
1 Comment »
Here’s the longer answer to that question. These are my suggestions based on the books that I’ve read over the last few years. These are all books that I liked and found to be of value, or at least to be of interest. I tried to focus the list and limit the qtty to what I expected is a manageable amount of reading for someone who is busy moving to another country.