My thoughts on China today.

Just read in the FT today about the Italian Government trying hard to sell their strategic holdings and bonds to the Chinese. It was a 360 for the Italian finance minister who once complain of the Chinese "reverse colonization" of the West. Indeed, it is a proud day for the Chinese people to be so wanted and desired in the world after two hundred years of weakness and being viewed as a country and race that will not rise again, a kind of relic like Egypt or Rome. It was in no small measure due to the current Communist leaders (since Deng Xio Peng that is) that led an open market economy that created such a boom.
      The success of China was actually an old story. It followed the footsteps of the Asian countries that over took the United States as the chief manufacturer of the World. It was Sony that overtook Zenith as the main manufacturers of electronics appliances eventually just as Toyota took the automobile market away from GM. Cheap labor and better made goods eventually flood the market and eventually took the United States out of the game. Under political pressure, the Japanese automobile industry began to produce their cars here with joint ventures or overtook American companies. It was the Japanese that coined the formula for success that was followed by Hong Kong, Taiwan, South Korea and ultimately China. It was old hat to say that China took jobs away from the States, when they left for Japan and other Asian countries years ago. That was of course due higher production costs (higher wages and union power) here made it less profitable and desirable for manufacturers to continue their operation here. Those who stayed employed cheap labor from Mexico and move their production there. Of course the story did not stop there. China's cheap labor is getting comparatively expensive to some manufacturers, so some move from China to Vietnam, where the wages are still dirt cheap. That kind of arena is one the American laborers cannot hope to return as the cost of doing business cannot compete with third world countries.
       China now being built as a cash rich country due to years of profitable business with the world (the % of business with the United States is still low compared to Europe and other countries). Learning from the fall of the Japanese experience of the 80's, where diversification and not enough restrictions on the overheating of the economy resulted in 20 years of slump. In fact the US economy is currently in the same boat, hence the Economist cover showing bother Germany &US leaders in Japanese style images. The Chinese government had invested heavily in US Government bonds, both as strategic and political move that is paying dividends now. For those who read enough books on Chinese  history, the Chinese governments are usually more political than economic in their considerations. Those bonds has become an insurance policy against US interference into China's internal policy (that included Taiwan, Hong Kong & Macao). It is perhaps ironic that given the timing that China is the last thing on the minds of the United States right now as internal problems of jobs, spending, education and infrastructure clouded the agenda, not to mention the threat of a European economic collapse due to the Euro. China is still featured as a side show, but how much of that could be as urgent compared to the polarization of the country and the brokenness of the political machine that is a tidal wave that threatened to cripple the country as the debate of the debt ceiling had clearly shown.
    It is my believe that China will continue to expand politically and economically as the needs of the Chinese will demand that. 1) because of the growth of industrialization in China, the pollution had led to the depletion of China's natural resources like food & water.  Which is why they try to colonize other countries to produce enough food to feed a growing population. The one child policy had slowed the growth but not entirely. 2) Yes by investing in other countries, that could spread the risk around. hence I think deals like the Italian deal would attract both Chinese government owned companies or the growing privately owned industries to come into the action. 3) With all this growth going on, one could sympathize the reason why they put on the crews on foreign influences and any possibility of the disruption of the good times. The Arab Spring had taken China by surprise, and any forms of revolutions could disrupt the country and going into chaos again. In order to have democracy in a country, one needs a affluent and well educated middle class in order to succeed. The prime example is the change in Singapore, where the middle class is the majority in the country. The reverse is Taiwan, where there is democracy but also corruption. It is a situation in progress that could led to the true democracy that the people could hope for. However it is not what China could afford at this moment. What they truly need is laws that the international community could trust and believe.

Thoughts on the 10th anniversary of 9/11.

9/11 has become a very important date in American history and ranked on par with Hiroshima & Pearl Harbor. However in my view, 9/11 was a day or reckoning that would come to us sooner or later. It was the weak-link in the amour of national security that the American people felt opened. Why ? The United States had waged the first Gulf War and openly involved itself in the Middle East. That interest had nothing to do with the Arab people, but with oil interest. Bin Laden was from Saudi Arabia that deeply resented the role the United States played in the area and supported the corrupted Arab monarchies that suppressed civil liberties in the region. To some Arabs, he was similar to a Robin Hood, who dare challenged the world domination of the United States. The above statement is of course not an endorsement of the ways Bin Laden, which was terrorism of the worst kind, where innocent people were killed to facilitate an ideology. Even though strictly speaking Al-Qaeda and the Tali-ban are two different organization with different agendas. In the minds of most Americans, they are almost the same. But there is a big difference. Al-Qaeda is a terrorist organization that is against Western interest and their involvement in the Middle East, whereas the Tali-ban is an extreme Muslim organization that wanted to cleanse Muslim countries of any Western ideology (women's rights, gay rights and return to tribal law). Both of these organizations were spawned as a retort to Western ideology and ways that they perceived as foreign and invaded their country. The interesting thing is that without oil and resources, the West would hardly cared a fig about what happened in the Middle East, so the back story of 9/11 had its roots in international business and oil interests, hence the attack on the symbol of World Trade was deliberate.
       That is the reason at this 10th Anniversary of this dreadful day of reckoning, how could we learn the real lesson from this. After a misguided war in Iraq and a long drawn out conflict in Afghanistan, losing 6000 lives and costing millions to our country, had it been worth it ? The Middle East conflict that had hounded every president of the United States since WW II is nowhere near a peaceful settlement and not to mention the changes in our daily life (airport security), our constitutional rights (The Patriot act), our moral high ground on civil liberties (Guantanamo bay & water board torture) has all been compromised in one way or the other. It would be a high price to pay for oil, energy or our empirical ideas on the worlds. That is especially important as our Federal Government has since been broken, fractured and unable to operate due to opposing ideology of where our country is going. The brief unification of our country after 9/11 has since disappeared, and some Congressman had to rally support for the health care of those policeman & firefighters who so gallantly fought to save lives during that fateful day as they were able to be cut due to the desire of a few to rein in spending. How far has we come indeed. In this day, I hope people would wake up from their grandiose dreams of a costly American Military empire to reality that the needs of the country (especially infrastructure and education) became the paramount consideration. With the Arab Spring came the realization that we cannot give democracy to a country that was not ready for it (Afghanistan) and it is the hearts and mind of the Egyptians, Libyans & Tunisians who believed in their counties freedom and willing to die for it. The US's limited assistance of the Libyan rebels under president Obama was a step in the right direction. It was a bitter lesson that we couldn't do nation building, but only help those who wished to have freedom and democracy. It was also the Arab Spring movement ironically that made Al-Qaeda obsolete and the execution of Osma Bin-Laden closed the chapter to 9/11 as far as many Americans were concerned.
      9/11 would remain an important watershed historical moment when America changed its course of history and a day many will never forget.

Investment From China is good.

I felt the need to write this blog because I think it is important to see how China or Chinese investment aboard could be a factor in growth in these countries. The Financial Times reported a Chinese tycoon Huang Nubo's investment in Iceland is seen as a threat and strategic investment for China. It is easy to view this with conspiracy theories because in China, the government's involvement in the private sector is still very substantial. This Iceland deal involved the purchase of 300 Square kilometers of wilderness land by Huang Nubo for $9 million dollars. His vision is to built hotel and resorts there where the natural beauty could be admired by all. Indeed, the natural beauty was the reason why the 55 year old Chinese businessman who has a net worth of $890 million. The fact is that China itself is expanding globally and been investing in foreign countries. The jump from 2004's $15 billion to last year's $220 is plain staggering. With the economic downturn in the United States & Europe became more painfully clear, the fact that developing countries like China, India & South America opening their coffers to invest is almost a godsend. The fact that the investment comes with a promise of more employment and opportunities is not lost with countries suffering greatly with sharp cuts and reductions. This has historical precedence. The fear of the handover of Hong Kong back to China in the late 1980's to early 1990's led to a  boom time to countries like UK, Canada & Australia. Money that was made in Hong Kong after years of prosperous China related trade flowed into Canada & Australia through immigration and investment in properties and businesses. The second example was more well known to Americans, as the Japanese boom led to the "economic invasion" into the United States. The fact that the Japanese companies invested heavily into the US property market and manufacturing facilities led to an American boom too. People at that time fear that the Japan was going to take over America and the world, both now proven not to be true at all. My own believe is that if the Iceland government is so afraid of a Chinese takeover, they could put these into the terms of the sale. In that way, they could make sure that only the uses that would not delete the area's natural resources would be allowed. I think a healthy dose of suspicion when the size of this  investment is totally understandable, but it would be unwise let that blind us to current economic situation that is facing us. The fact that foreign tycoons are interested in investing in one's country is actually a good thing. When Hong Kong Tycoon KS Li successfully bid the usage if the two ports in the Panama Canal, the American interests cry foul and voiced concern that it would be China that would be controlling the canal from now on. Nothing was further from the truth, the two ports under Li's company Hutchison boomed. But Panama even today did not have regular official relationship with mainland China is a fact. So my conclusion is that one should not create fear and suspicion whenever foreign investment of a third world booming country occurs. In today's environment we should maybe welcome them with open arms.