Tag Archives: China

Google Maps in China: FIXED! (iPhone/iPad)

Google Maps works great in Beijing, but it has never worked accurately in Shanghai or many other parts of China. Countless requests to Google and Apple to fix the problem go unanswered, so we’re forced to take matters into our own hands.

You’ll need to Jailbreak your iOS device (which is completely legal), thereby installing Cydia.

Once you’ve got Cydia installed, open Cydia and choose “Manage” from the bottom menu, then choose “Sources”. Click the “Edit” button on the top right and then click the “Add” button on the top left. In the dialog box that comes up, enter the following address:

http://apt.mirrordev.com
google-map-cydia-add.jpg

Click the “Add Source” button to continue, Cydia will verify the URL, then download a list of packages. Once that’s complete just press “Return to Cydia”, and on the top right of the Cydia window click “Done”.

Now, click on “MirrorDev” in your list of Sources, and choose “Location Fixed” from the list. Click the “Install” button on the top right.

google-map-cydia-location-fixed.jpg

After “Location Fixed” is installed, you’ll see a new entry in your Settings screen called “中国区地图校正” (China Map Correction”) that has two settings:

启动 (Activate) [On/Off]

联通版本(China Unicom Version) [On/Off]

Thanks to the developers at MirrorDev for doing what Apple and Google have consistently failed to do. Better yet, check out MirrorDev’s post about the Google Map Fix.

google-map-settings.jpg

Japan: From Kamikaze Capitalism to Smartpower Dynamism

Key points from “Japan: From Kamikaze Capitalism to Smartpower Dynamism“.


“The impact on the real world, however, is very similar. Excessive financial leverage–whether simple or complex–forces mitsu no kajo–three excesses: excess debt, excess employment and excess capital stock,” Mr. Koll continued. “I recently visited China and there we have almost three and a half years of global demand of refrigerators sitting in inventory. So, I really urge you not to go into the refrigerator business, because the competition there is going to get very, very intense. It may not be quite as bad in the global car industry or the steel industry, but basically excess capacity–and with it excess employment–abounds. The great liquidation of many of these assets is still to come. During the boom, producers around the world prepared to supply for 4.5-5 percent global demand growth. In reality, we’ll be lucky to get 3 percent or 3.5 percent on a sustained basis over the next decade.”

This report was filed in May 2009, months into the “Expand Domestic Consumption” (扩大内需) policy. Sounds like China’s magic central planners are creating the mistakes central planners are known for. Just another reminder than short term numbers are not very meaningful. A friend from GE used to say “If you torture the numbers enough, you can get them to confess to anything”.

Japan has great strengths in R&D, Mr. Koll pointed out. “Throughout the 1990s, while the banks were bankrupt, while politics was a disaster, you see that corporate Japan continued to invest.” R&D spending amounted to 3.4 percent of GDP, “way above what you have in the U.S., way above what you have in Germany.”

In the U.S., the private sector accounts for only half of R&D, with the balance carried out by the American military and military contractors. In Japan, the private sector share is 80 percent, so there’s more new technology getting out into the broader marketplace, from the Toyota hybrid to cellphones: “If you have an Apple iPhone, you find that about 62 percent of the components are made by Japanese companies and can only be made by Japanese companies.”

China R&D spending is extremely low. Nobody is willing to invest in R&D because your innovations will be copied. The gov’t talks about enforcement.

Of the 350,000 wholesalers in Japan, two-thirds buy from other wholesalers and sell to other wholesalers. “It’s a Byzantine, clustered, multilayer distribution system, and it is why Japan is not very profitable. Here, the good news is being unleashed by the current recession. We are seeing massive, unprecedented restructuring of the supply chain, of logistics, of merchandising.”

Sony has pledged to cut its suppliers by half in the next 12 months; Toyota has said it will buy steel from a Korean company rather than a Japanese firm. Mergers in the last two years have reduced the number of department-store chains from eight to four.

SD is another area where China is also a mess. However, the Chinese economic system has a lack of trust. Ironically, the middle-men probably are making that situation worse. If import tariffs were lowered to reasonable level and smuggling was properly prevented on goods en-route from Hong Kong, Sales & Distribution in China is a huge field open for reform.

China: How not to handle pirates

This morning the Shanghai Daily reported: “Somali pirates: Ransom is ours


A HELICOPTER dropped a US$4 million ransom payment yesterday onto the deck of a Chinese coal ship hijacked by Somali pirates in mid-October, a pirate source on board the vessel said.

The ship was owned by Chinese State Owned Enterprise China Ocean Shipping – COSCO (中国远洋). The Shanghai Daily doesn’t state whether the ransom was funded by COSCO or directly from gov’t funds. Regardless, this is a state owned enterprise – this is gov’t money. Democracies have a rule: Do Not Negotiate with Terrorists.


The argument against negotiating with terrorists is simple: Democracies must never give in to violence, and terrorists must never be rewarded for using it. Negotiations give legitimacy to terrorists and their methods and undermine actors who have pursued political change through peaceful means. Talks can destabilize the negotiating governments’ political systems, undercut international efforts to outlaw terrorism, and set a dangerous precedent.

Worse, the somali pirates aren’t ideological revolutionaries seeking the resolution to a conflict of values. These guys are thugs. Street gangs that have taken to the ocean. Paying the $4MM USD to these guys just advertises: “Open Season on Chinese Shipping”.

Weren’t you guys watching when the US handled a similar incident? We negotiated with bullets. And the result, the next hostage was Chinese. Keep this up and there are going to be a lot of Chinese hostages around the world.

Macau: More gambling than Vegas?

I was recently surprised to hear that Macau gambling revenues have overtaken Las Vegas. The explanation is that Chinese people love to gamble, and when they hit the tables they simply play much bigger than people in America. There is some truth to this. In the USA, the overall rate of “pathological gambling” is 1.8% for Chinese Americans, and 3% for Chinese immigrants. However, that doesn’t seem to explain the entire picture.

One trip to Macau and you’ll probably be asking yourself what the numbers really mean. In typical China Fashion, it means less than you think.

'07 Gambling Revenues: Macau  $7.0B   Vegas   $6.5B
VIP Rooms: Macau 65% Vegas 0%
Slot Machine Revenue: Macau 5% Vegas 60%
Gambling % of Revenue: Macau 95% Vegas 40%
Length of Avg Visit: Macau 1 Vegas 4
Hotel Rooms: Macau 13,000 Vegas 130,000

65% of money bet in Macau is in the “VIP Rooms”, which typically equals money laundering. Without that, Macau is at about $2B/year. In terms of pure table games, Macau and Vegas are nearly equal – around $2B/Y, but Slot Machines contribute more than double table game revenues, and the vacation/convention business accounts for 2.5x the gaming total. In summary:

Macau: $2.5B (less money laundering)
Vegas: $16B (including slots and retail)

Those numbers basically match what you feel when you’re in Vegas.

You may be wondering how VIP Rooms work. James Fallows’s new book “Postcards from Tomorrow Square” explains.

The Chinese government doesn’t allow rich people to take their money out of the country easily, it allows them to convert only small amounts of renminbi each year. So a factory owner from the Pearl River Delta or a corrupt public official who has grown wealthy, will head to Macau.

One Western banker with extensive experience in Macau pointed out that the city functions as one big, quasi-official money-laundering site via the numbers gold dealer’s shops on either side of its border with mainland China.

Chinese visitors buy bold with RMB from shops on their side of the border and then sell to dealers on the Macau side for Hong Kong dollars – a ‘hard’ currency that can be converted into U.S. dollars or euros and sent anywhere in the world.

Something similar can go on when wealthy Chinese visit a VIP room. The room’s operator lends them money for gambling – often large sums, worth thousands or millions of U.S. dollars. The loan is in Hong Kong dollars, the main betting currency of Macau (its own currency is the pataca). If the Chinese gambler wins, he now has hard currency. If he loses, he settles the debt back in China, in RMB. A related practice is “doubling down” which the bets are made in one currency, say Hong Kong dollars, but the players agree to settle later in another, like U.S. dollars. Exactly how the debts are paid, and just where the touts get their substantial operating capital, is obscure. But the rooms and other Macau-based services are assumed to be a major channel for money flowing illegally out of China – and North Korea.

Fallows also wrote one of my favorite quotes ever summarizing doing business in China:

“These standards include such vague-sounding principles as rule of law, transparency, and accountability, which in practice mean: Can you trust a contract? Can you win a lawsuit? Do you know who’s really making a decision? Will the decision be made in favor of whoever provides a “red envelope” containing the biggest bribe? How many sets of books should a company be keeping, anyway? How much money laundering is too much?”
“Postcards from Tomorrow Square” p108

Foreign Policy: China, the new Lucent

This summer Foreign Policy posted an article called saying “The whole Chinese economy’s getting ready to burst“, comparing the growth of China’s export model with Lucent technologies in the 90’s. The article is long on adjectives and short on numbers. The premise isn’t necessarily wrong though.

China’s fortunes over the past decade are reminiscent of Lucent Technologies in the 1990s. Lucent sold computer equipment to dot-coms. At first, its growth was natural, the result of selling goods to traditional, cash-generating companies. After opportunities with cash-generating customers dried out, it moved to start-ups — and its growth became slightly artificial. These dot-coms were able to buy Lucent’s equipment only by raising money through private equity and equity markets, since their business models didn’t factor in the necessity of cash-flow generation.

Funds to buy Lucent’s equipment quickly dried up, and its growth should have decelerated or declined. Instead, Lucent offered its own financing to dot-coms by borrowing and lending money on the cheap to finance the purchase of its own equipment. This worked well enough, until it came time to pay back the loans.

Personally I would make more of a comparison to Enron once the internal debt to GDP number gets shown to be 3x higher than the commonly accepted numbers. However, unlike Enron China doesn’t actually report these numbers – all finance numbers are considered State Secrets (国家机密), fortunately they don’t show up on Danwei’s list of state secrets.

Yiwu (义乌): “There is no cheapest, only cheaper”

CNN put together a story about Christmas shopping in Yiwu, the worlds largest wholesale small commodities market, 300km south of Shanghai. That’s a 2.5 hr ride from Shanghai’s South [Train] Station (南站) Additionally, Yiwu also functions as a sort of ‘Wall Street’ for the counterfeiting industry, where 100,000 counterfeit products are openly traded daily. Take a look at the CNN article for some fun pictures.

Almost as large as the city’s downtown, the day market will take more than a day to cover in its entirety. And be prepared to buy lots of gifts this year; the traders in Yiwu sell in bulk. Trains to Yiwu leave from Shanghai South Railway Station.

“Chinese people don’t always bargain these days,” says Wang Fei. “Sometimes they want to know the price for quality. It was not always like this and we had to bargain a lot.”

“The market is the town,” says Mrs. He. “Other towns are far away. It takes time for products to get there. Here, it’s always Christmas.”

“The Yiwu market is old California,” says Zhou Zheng, a local merchant. “There are prospectors everywhere. They’re all panning for gold. Some of them find it.”

“People in Yiwu have a saying,” Zhou Zheng continues, “‘Mei you zui pianyi, zhi you geng pianyi.’ This means: there is no cheapest [price]; only cheaper.”

The sun goes down and the Yiwu night market comes out

Zhang Yimou: Indie Film Director

FT put together an excellent interview with Zhang Yimou (张艺谋), China’s leading feature film director. Some very interesting points come out during the interview, showing the artist inside is alive and well.

Zhang uses a modest apartment in an anonymous Beijing suburb as his office – and there is a back-to-basics quality about the two films he is working on, one a remake of a Coen Brothers movie. Although he does not quite put it this way, it feels as if he is trying to re-establish himself as an independent filmmaker. When Zhang describes his work he takes a slightly defensive tone, a sign that fame and wealth have come at a critical cost.

“I am still an independent artist. I am not a member of the Chinese Communist Party or the Communist Youth League,” says Zhang. “I am still working hard to make one new film after another. My life has not changed at all.”

He smiles at the label and says he is not bothered. “I am not a person out of the official regime. I was engaged to do the Olympics and because the state leaders were very happy, they used me again for the national day celebrations. These were just assignments,” he says. “The more independent an artist is, the more special or unique his or her work is.”

Perhaps most importantly, Zhang Yimou sure uses a lot of RED in his films.

A decade later, he was making powerful films that many thought of as allegories for authoritarian rule under the communists, including Red Sorghum (1987) and Raise the Red Lantern (1991), a claustrophobic examination of the life of a concubine that meshed his talent for intimate detail with a luxuriant use of colour. He has also dabbled in grand theatrical events, staging Turandot in Beijing’s Forbidden City palace a decade ago. In recognition of his status, he has just been announced as Martin Scorsese’s successor in the Rolex mentoring scheme, which each year matches distinguished filmmakers and other artists with up-and-coming protégés.

In regards to his direction of the opening ceremony for the Olympic Games:

“I am very proud of myself,” Zhang says. “Everyone knew they were going to get a show about traditional Chinese culture, but … I was able to find a way to use multimedia to demonstrate the new, modern China.”

When he and his film school colleagues started making movies in the 1980s, he says, they were still angry about their suffering during the cultural revolution. “At that time, lots of Chinese people were thinking about the tragedy of the cultural revolution. The work of most film directors reflected this,” he says. (“I never had a mentor,” he grumbles. “At that time, the biggest issue was whether you had enough to eat.”)

Selling Information Products in China

This is a bit more wholesome than a lot of the sales in China than I’ve seen. I hope local companies start operating more along these lines.

Once staffers went through training, Sullivan found it beneficial for them to go out on sales calls in pairs. Indeed, the Wolters Kluwer sales team in China has adopted a very team-oriented approach, right down to the way the salespeople are compensated. “In other countries we don’t bother with a team incentive,” Sullivan says. “In China, a nice chunk of the commission is based on how the team does.”

Check out the complete story (about one page) on CNN Money.

Finally an Economist who understands China

Patrick Chovanec at Tsinghua has put together some excellent research on the current property bubble in China.

In China, however, “flipping” is not the problem. Some people may be engaged in short-term ”flipping,” but as I’ve described in my FEER article “China’s Real Estate Riddle,” a lot more are buying residences — in many cases multiple units — and holding them vacant indefinitely as an unproductive ”store of value,” like gold. As I mentioned in my article, the Financial Times estimates that there are 587 million meters of apartment space that buyers have purchased over the past five years only to leave lying empty (for a concrete notion of what this statistic means, take a look at Al Jazeera’s report on Ordos). This puzzling phenomenon is due to the fact that Chinese citizens have relatively few investment options, and China’s real estate sector (unlike its stock market) has never experienced a sustained downturn since the country converted to private home ownership in the mid-1990s. The fact that China has no annual holding tax on property means there is little penalty for letting property lie idle, in the hope that it will appreciate or at least retain its value. The result is an inflated market where the demand for property as a pure investment vehicle far outstrips the demand for affordable, usable space.

The way I read these figures is that an immense amount of new housing is being purchased and accumulated (in a vacant condition) off-market. Nobody has any idea what it is actually worth because there is little urgency to offer it, to end users, on the secondary market and actually see it priced based on their demand. If investors were at least trying to “flip,” we might find out, but they’re not, and so prices for new residences (especially on the high-priced luxury end) continue to rise without anything to bring them back down to earth.

If China’s real estate sector were experiencing a typical bubble, where assets are being rapidly flipped higher and higher until the music suddenly stops, China’s new property sales tax would make eminent sense. But this new policy misdiagnoses the problem, which is that property is being accumulated and left idle, indefinitely, as a store of value. As long as that property remains off-market, and is not compelled to be priced based on actual demand for affordable usable space, the asset price illusion will continue and the bubble will grow. If China wants to bring it real estate market back to earth — and that’s a big “if” — it should be offering investors a reason to use, rent, or sell. An annual property holding tax does this. A higher property sales tax, while well intentioned, only makes things worse.

Read the full article.

Chovanec also had an article in the June ’09 issue of the Far Eastern Economic Review called “China’s Real Estate Riddle“.

A modest annual tax may not be the only factor shaping these behaviors, but it’s emblematic of an important difference in outlook. There’s an old story reported by an American journalist in Shanghai after the end of World War II. Ravaged by hyperinflation, locals had turned to using tins of sardines as an alternative currency. One recent arrival opened his “proceeds” from a sale only to find the sardines inside were spoiled. He complained to the other trader, who cried, “You opened them? My God, man! Those sardines aren’t for eating, they’re for buying and selling.” Apartments in China aren’t for living in, they’re for investing. That is the real source of demand.

One problem is that using luxury condos as currency is immensely wasteful, compared to sardine tins or tiny amounts of gold. Construction of all these useless high-end units consumes huge quantities of labor and materials that could go into creating, rather than merely representing, useable wealth. And without adequate maintenance (recall the need to minimize holding costs), any practical utility these units might have had as residences will deteriorate rapidly.

The other challenge is psychological. A useless asset like gold or vacant apartments can only serve as a store of value so long as people have collective confidence it will continue to perform that function and thus retain its value. China’s property market may well crash. The point is that if it does, it won’t be because the supply of apartments outstrips the practical need for affordable living space, as it has for many years now. It will be because the Chinese lost faith in real estate as a form of tangible savings, or found a better alternative.

And last up, an article concerning China’s “Quality” of GDP

My concern is how even true-blue GDP figures can sometimes paint a misleading picture of the real health of an economy.

When smart analysts look at companies, they don’t just look at the announced profit figure and accept it at face value. Even if they have no reason to doubt the accounting, they try to apply a concept called “quality of earnings” to get a better sense of how the company is really doing.

Back in March, I was asked on Chinese TV whether I thought China could achieve its target of 8% GDP growth for 2008. I said I didn’t see any reason why it couldn’t. All the government had to do was take all the laid off migrant workers and hire them to dig a hole in the ground one day and fill it up the next. Since the total would be added to National Income, the government could simply pay them enough to hit whatever GDP target it had in mind. The more important question, I said, is whether China is preparing itself for the next phase of economic growth. Focusing exclusively on GDP, as a number, is a distraction.

The example I gave may have been a little bit extreme, but it gets at an interesting and important point. GDP tells you how much the economy is producing; it doesn’t tell you whether that production is actually creating real value or not. In a free market, where people are making voluntary exchanges based on supply and demand, presumably it is, otherwise they would behave differently (unless, of course, there are major externalities that market prices aren’t taking into account, see Stiglitz, below). But when the State is either directing economic activity without regard to prices, or when it is artificially influencing the conditions of supply and demand in a way that distorts prices, the conclusion doesn’t necessarily follow. Production may actually consume more value than it creates, destroying wealth, or divert resources from more productive pursuits, yet in the short term, still count positively towards GDP.

The “resilience” of the Chinese economy right now is based, at least in part, on several factors that I find cause for concern:

construction of large-scale luxury condo developments that go entirely unoccupied and serve merely as investment vehicles, on the expectation of future appreciation;
easy state-provided credit that has kept businesses — many of them poorly run and financed — from exiting sectors (such as steel) that have chronic excess capacity;
a massive shift in resources towards the State Owned sector and away from private enterprise (including the acquisition by the State of controlling stakes in successful private companies);
misdirection of business loans into stock market and real estate speculation, fueling bubbles in both markets;
direct investment by government ministries in order to speculate in — and thereby prop up – the real estate market, on the misconception that a rising real estate market is a “driver” of growth (rather than a result of real demand for more and better usable space driven by business expansion and rising living standards);
the possibility of “channel stuffing,” where wholesalers and retailers are forced to build up unsold inventories to keep factories (particularly state-owned factories) running. Ironically, this shows up in China’s official statistics as “retail sales” because in China, retail sales are counted when the manufacturer ships, not when the products is sold to a consumer.

Developing a vibrant service sector, improving quality and safety in manufacturing, building recognized and well-respected brands, developing more efficient and transparent capital markets, providing a social safety net that lubricates labor markets and liberates savings, moving towards full convertibility of the Renminbi, learning how to manage and grow businesses in political and social environments beyond China’s borders — these are the challenges China must master to take its economy to the next level. But I don’t see anything in the “8% growth” story that is moving China in that direction.


Using SSH to bypass The Great Firewall/GFW

This looks like a long process, how does it work after I’m done?

  • You’re ssh tunnel to your server outside the GFW will be active *whenever* your online
  • When you need to bypass the GFW, simply select “SSH” from your locations menu
  • When you don’t need to use your proxy, simply switch your location back to Automatic

What you need:

Configuring SSH key based authentication can be very difficult if you haven’t configured it previously. The idea is:

  • Generate a key set on your local computer (with ssh-keygen on the local system)
  • The Key Set will make two files on your hard drive, a “Private Key” and a “Public Key” (~/.ssh/id_rsa.pub on the local system)
  • Note that the “Private Key” is many “lines” long, but the “Public Key” is a single line (no newlines/returns)
  • The server that you’re logging into keeps a list of keys that are authorized to access the system (in ~/.ssh/authorized_keys on the server)
  • Copy the single line of your “public key” file onto any line of your “authorized keys” file.
  • Make sure the permissions of both your public keys and private keys are “correct”. “Insecure” file permissions are the most common cause of SSH key’s failing to authenticate.
  • Always keep your .ssh dir and all your keys chmodded to 700 and 600 respectively.
  • Use “ssh -vvv” if you have trouble logging in, this will give you diagnostic output.

Verify that you’re able to connect to the system you’ll be using to proxy via SSH.

If you’ve got the Apple Developer Tools installed, then go directly to the AutoSSH website, download the source, compile and install. In case you don’t, I’ve complied a copy that you can download here.

Just extract with: [shell]tar zxvf autossh.tgz -C /[/shell]

Use foreground mode to verify that you’re able to connect to the system of your choice via AutoSSH.

[shell]autossh -M 19999 -D 9999 -N example.com[/shell]

Use cURL to verify that your proxy is working

[shell]curl —socks4a localhost:9999 -v www.facebook.com[/shell]

Now that your proxy is online, the next step is to define a new location in your Mac OS X “Network” Profiles.

In System Preferences / Network:

  • From the Locations dropdown choose “Edit Locations” then add a new location called “SSH”
    Screen shot 2009-12-01 at 上午01.07.36.png
  • Return to the main Network window and choose “Advanced” then “Proxies”
    Screen shot 2009-12-01 at 上午01.07.28.png
  • Enable “SOCKS Proxy” setting the proxy server to “localhost” and port “9999”
    Screen shot 2009-12-01 at 上午01.08.09.png
  • Under bypass proxy setting for these hosts and domains, you can enter any sites that will be slowed down by proxing via your SSH connection:
    [plain]*.local, 169.254/16, *.cn, *.163.com, *.baidu.com, *.youku.com, *.toudou.com, *.sina.com, *.chinesepod.com[/plain]

Last, we just need to configure autossh to start when our Mac boots up. We’ll use a Login Hook so that the script will run regardless of which user logs in.

http://support.apple.com/kb/HT2420

You’ll need to create the shell script to use as the Login Hook, save it as /usr/local/bin/loginhook, and make it executable (chmod 755).

[shell] #! /bin/bash

if [ "$(ps ax | grep autossh | grep -vc grep)" -lt 1 ]; then
  sudo -u {USER} /usr/local/bin/autossh -f -M 19999 -D 9999 -N -o ServerAliveInterval=3 {SERVER}
fi

[/shell]

If you have trouble connecting and need to debug the autossh line, first try disabling the “-f” so that the program runs in the foreground and returns output. If you need to send the output to a log file, you can edit the loginhook script to something like:

[shell]sudo -u {USER} autossh -M 19999 -D 9999 -N {SERVER} 2&>1 >> /tmp/loginhook.log[/shell]

(Note that you’ll need to replace {USER} with the short name of the user account that is providing the SSH public key and {SERVER} with the host your connecting to)

[shell]sudo defaults write com.apple.loginwindow LoginHook /usr/local/bin/loginhook[/shell]

If your ever in doubt as to weather or not your new Proxy is running correctly, save the following script as /usr/local/bin/gfw. Run this script to instantly check on the status of your proxy.

[shell]curl –socks4a localhost:9999 -v www.facebook.com[/shell]

Reboot, Test and Enjoy!

China: Upside Down?

The China bubble situation is looking ominous today.

Beijing, Shanghai and Guangzhou sales all fell in September, even though developers continue to add inventory. If Sales don’t pick up in October, the bubble prick may finally happen.

Real-estate investment rose 9.9% in Q1/Q2, Exports fell 23.4%, yet bad loans will help us “protect 8” (8% GDP growth/year)

Why is Focus Media (does elevator TV ads in China) valued at $1.4B? Considering sunglass maker Oakley with 30 years of reliable operations, excellent brand image, huge gross margins, and world wide distribution sold for $2B to LUX, I can only say it’s off by at least a zero. How do “investors” keep forgetting the lessons from each prior bubble?

China claims yet another 7% rise in FDI. OK. From where? The western economies are stretched for cash and not investing. If that FDI number is accurate, there is only one reasonable source: hot money. And if there’s that much hot money here, it’s going to hurt when it goes.

Shanghai Int’l Board to open, with RMB denominated shares. Last time this was tried was in Japan’s 1991 Hyper-Bubble. Japan closed the exchange in 2004 due to lack of participation.

BAD NEWS: China’s Caijing magazine to stop covering corruption


logo.gif Many western people fearfully view China. China is seen as a great capitalist opportunity and as a geopolitical and economic rival. The numbers that come from China look far better than numbers from anywhere else. Why? Because it’s Standard Operating Procedure for most companies in China to keep two sets of books – and it’s customary to pay a higher price if you actually want tax receipts. In short: China numbers are like ENRON, but much bigger…

The horrible news today is that the best corruption watchdog: Caijing Magazine is slashing it’s scope of reporting by 20-30%. There will no longer be reporting on politics or social issues. Source: foreignpolicy.com.

In related news, Caijing does have a very interesting article about why the Yen failed to reach reserve currency status, and that article is eriely similar to the situation that China is facing right now:

In the 1960s, when the yen was fixed at 360 to the U.S. dollar, the Japanese economy grew at an average 10 percent per annum. In the 1970s, when the yen began to appreciate during an oil shock, growth slowed to an average 5 percent.

Following massive stock market and real estate bubbles after the 1985 Plaza Accord, the yen appreciated sharply against the dollar. In 1992, the Japanese currency rose to 128 to the dollar from 239. Appreciation continued until April 1995, when the yen hit 80, and then followed a reverse course until falling to 147 in June 1998, a decline brought to a halt only after joint intervention by the Bank of Japan and U.S. Treasury.

Source: caijing.com

China & Hong Kong – Efficient Grey Markets

In spite of China’s WTO entry, import tariffs into China are very high, especially compared with the developed states in Asia. For example, importing a camera into China would cost 17% VAT + approx. 10% Tariff.

Meanwhile, Hong Kong has 0% VAT and 0% Tariff for most products (except fuel, alcohol and tobacco). The problem is that the border between Hong Kong and Mainland China is a very porous one.

iPhoneHongKong.png

So while the iPhone hasn’t yet officially hit the market here in China, you can buy unlocked Hong Kong iPhones on the Shanghai Grey market for 5500 RMB (16GB) and 6300 RMB (32GB). Note that HKD is currently 1:1.13 (CYN:RMB), so you’re going to pay approximately 13% more than in China.

However, there is 17% VAT that should be added to all China Products. The Tariff shouldn’t be applicable since the phones are purchased in Hong Kong, and obviously the items are smuggled in – because there is no other way around the VAT.

Bottom line, for a 13% service charge the grey market will handle currency conversion from currency controlled Chinese Yuan into freely tradable Hong Kong dollars (itself not an easy task), smuggle the items into China, and handle the shipping charges.