Chinese Economics Thread

[Hendrik_2000]

E commerce is going to drive the new China economy that is why it is so important to have the infrastructure in place now


China's shoppers are shaping the new global economy
Updated: 2013-08-30 11:22
By Zhang Yuwei (China Daily)

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China's shoppers are shaping the new global economy

Shoppers from the world's No 2 economy have been climbing the consumer rankings charts recently.

A Standard & Poor's report predicts that China will overtake the US to become the world's No 1 consumer market within the next five years. Not only that, but the number of online buyers is increasing as well.

A new report from Bain & Company said China's e-commerce market is expected to overtake the US' this year to become the world's top online marketplace.

Online shopping has just started to take off in China in recent years. Various online Chinese retailers have been booming with the increasing demand of Chinese consumers. China's e-commerce giant - Hangzhou-based Alibaba Group - predicts that within a decade, online spending could account for nearly half of the country's retail spending.

China's e-commerce market grew at an average rate of 71 percent between 2009 and 2012 compared to 13 percent in the US, said the Bain report, adding that it's expected to reach $539 billion by 2015. Total online spending by Chinese consumers reached $212.4 billion in 2012, compared to $228.7 billion in the US.

China's online consumer base is backed by an Internet population of more than 590 million - the world's largest - many of whom are users of smartphones as well. China is also currently the top smartphone user market.

Popular shopping sites - such as Taobao.com and Tmall.com, which are Alibaba affiliates - have gained regular shoppers at home and abroad thanks to online shopping's geographic flexibility.

In the first 11 months of last year, Alibaba topped $157 billion in combined sales through Tmall.com and Taobao.com.

"On the most basic level, the population is just so large at 1.3 billion," said Oscar Yuan, New York-based vice-president at Millward Brown Optimor, a media and branding firm. "The population is well-educated, media and internet savvy, well traveled, and open to ideas and products from other areas of the world."

David Sadigh, CEO of Digital Luxury Group in New York, said China's potential in e-commerce has made many brands - both domestic and foreign - expand online to attract more consumers.

"With several social network platforms reaching more than 300 million Chinese, and who actually spend more and more time online especially through their mobile, it's a must for any serious brand to be proactive there," Sadigh said.

Online shoppers are only one component of China's consumer market. There's also a growing number of affluent middle-class shoppers.

"China's booming middle class will become not only important for China's economy, but will also have a direct impact on many countries and industries," said Sadigh.

China's middle class is expected to triple to 630 million by 2022, up from 230 million in 2012, according to a recent study by the China-US Exchange Foundation.

Those middle-class shoppers have average annual earnings of between $19,500 and $90,000 and are expected to be the driver for the future growth of luxury markets, according to Exane BNP Paribas, an equity research firm.

Chinese consumers' appetite for luxury brands also contributes to the percentage of its growing consumer base in the world.

A recent Millward Brown survey on foreign brands and Chinese consumers found that 13 of the 20 foreign brands that are most popular in China are from the US. The survey looked at such criteria as how "meaningful", "different" or "salient" the brands were and how readily they connected to Chinese consumers.

"For the Chinese consumer, the desire for quality and experience results in an environment ripe for international brands to make inroads with the 1.3 billion consumers," said Yuan.

Even as China's consumers are taking off and helping to reshape the global economy, the country still has the potential to increase its consumption growth, especially during an ongoing slowdown in its economy, whose growth rate currently sits at 7.5 percent.

"China needs greater emphasis on consumption in order to further stimulate the demand side of the growth equation," said Denis Simon, vice-provost for International Strategic Initiatives at Arizona State University.

Dan Steinbock, a research director of International Business at the India, China & America Institute, said China needs a gradual shift from investment-led to consumption-led growth.

"It is gradual but firm and extensive reforms that will foster the economic and social basis for robust consumption in China," said Steinbock.

Contact the writer at [email protected]

(China Daily USA 08/30/2013 page11)
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[Hendrik_2000]

First posted by ins4ser at CDF show the benefit of high speed railway exactly as discussed in this thread

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High-speed rail is at the foundation of China’s growth strategy

By Yichuan Wang August 22, 2013
Yichuan Wang is an undergraduate economics and mathematics student at the University of Michigan.

All aboard the development express. Reuters/China Daily

Has China overinvested in high speed rail? Anecdotal stories of empty train stations (paywall) in far-off provinces have led some to conclude that high-speed rail is just another Chinese white elephant—an investment without a cause. But the recent experience with high-speed rail belies this narrative, and a closer look at the data reveals that high-speed rail has been, and is set to be, a vital part of China’s growth strategy.

chinese passenger rail turnover
Passenger rail has grown very quickly over the past decade. As seen above, from 2001 to 2011, national passenger turnover doubled. Yet this rise in demand has not been accompanied by a comparable increase in the length of railroad track. As a result, each kilometer of rail is now supporting more passengers. In other words, rail utilization has become more intense. In 2001, the average kilometer of rail supported 680 km (422 miles) of passenger travel. By 2011, this rose to 1,030 km, a 50% increase. This phenomenon has been going on across the country—particularly in the inland provinces. During the same time period, rail intensity in the frontier province of Qinhai increased by a factor of 2.5. In no other period of Chinese history has passenger rail demand been this strong.

plot 2
In this context, high-speed rail has become important by enabling a more intense utilization of existing railways. When too many trains take too much time traveling the same length of track, they can get in one another’s way. But high-speed rail gets around this issue by reducing the amount of time any single trip takes. For example, the July 1, 2012 opening of the Yichang-Wuhan high-speed rail line cut travel time between the two cities from around four hours to only two. The recent Guangdong-Beijing line has also cut travel between the two cities from 20 hours to just eight.

This has occurred across the country, and as a result, high-speed rail has allowed more trains to be placed on the same length of tracks without overcrowding.

High-speed rail isn’t short of passengers either. Back in 2011, Tsinghua University professor Patrick Chovanec penned an editorial arguing that high-speed rail would be too expensive for most Chinese citizens to use, and therefore, would not have enough riders to sustain itself. But just one year later, average daily ridership on the high-speed rail network has hit 1.33 million daily passengers—more than one-fourth of the total number of passengers on the rail system.

The customer reaction to the previously discussed Yichang-Wuhan rail line has been especially positive. The July 1 opening was first announced on a government website on June 25 at 10 p.m. That night, the train station received calls asking about tickets from more than 50,000 people. The news about the opening also led a blogger in Yichang to exclaim: “Two hours from Yichang to Wuhan! A trip that I never dared to imagine has now become reality—truly a blessing for the masses.” Subsequently, during this year’s three-day summer boat festival, the Yichang train station saw a staggering 72,000 passengers pass through, up 71% from a year earlier.

Given that inland Hubei, a relatively poor farming province, has benefited from such an enthused ridership base, this bodes well for expansion in other parts of the country.

The above data and anecdotes show that high-speed rail is a justified investment, if only based on current conditions. But it still ignores a much bigger issue: the importance of high-speed rail to China’s future development strategy.

First, for China to continue growing, it must work on raising the income levels of the inland provinces.

So as more Chinese manufacturing moves inland, efficient freight transport will become even more necessary. Otherwise, the factories will be cut off from the coastal markets, and therefore will miss the opportunity to become as competitive as Guangdong and other coastal provinces were 10 years prior. As discussed above, high-speed rail reduces the time passenger trains spend on the railways, and therefore open up more room for freight trains. This is good timing, as freight demand is likely to only increase as more goods need to be shipped from inland China to be sold and more coal needs to be shipped across the country to satisfy rising energy demand. Thus, by strengthening the freight transport system, high-speed rail raises growth in rich and poor provinces alike.

Second, by making travel between large cities more economical, high-speed rail builds a foundation for service industries. Since high-speed rail dramatically cuts down travel times, many trips that used to be overnight now can be done in a day. While this may not be as important for the average tourist, this can be indispensable for client meetings in the business world. Without this, many high value added service industries, such as consulting or finance, would not be as strong.

Third, by making travel and tourism cheaper for middle class Chinese families, high-speed rail can actually help China rebalance towards consumption. According to estimates from the World Travel and Tourism Council, the tourism industry makes up 10% of employment in China, and its direct and indirect effects add up to around 14% of China’s GDP (pdf). Since tourism depends on cheap travel, high-speed rail could play a pivotal role in fostering this industry.

And indeed it has. During this year’s spring festival, the opening of the Beijing-Guangdong line caused an explosion in long distance travel packages for Beijing, with a major tourism company reporting a 50% year-over-year growth in this category. It is further forecast that the opening of this new line will result in an over 20% increase in Beijing tourism by the year’s end.

By making travel much cheaper, high-speed rail can encourage more tourism and consumption growth.

Fourth, if China is to avoid an environmental catastrophe, it needs to start developing energy-efficient forms of transport right now, and high-speed rail certainly fits the bill. As a recent Economist has documented, China is experiencing never-before-seen levels of air pollution. And given that China has a population of 1.34 billion people, it cannot afford to have intercity transportation be based on automobiles. There is not enough space—both physically and environmentally—for China to expand on that path. High-speed rail also competes with Chinese airlines. As CNN has documented, high-speed rail has become a very attractive option against a backdrop of worsening airport congestion. Because air travel is one of the most carbon intensive forms of transport, any substitution away from air to rail reduces the Chinese carbon footprint. Therefore, besides being a prudent investment in economic growth, high-speed rail is also a necessary investment in preserving China’s environment.

This is not to say there is nothing to criticize about China’s high-speed rail development. The procurement procedures for Chinese rail cars are notoriously corrupt. Caixin has found stories of “sink tops that cost 26,000 yuan each, [and] 11,280 yuan for a water valve.” But the Chinese government is slowly improving on this matter of financing. While not directly related to high speed rail, the recent invitation for foreign bids to improve Chinese infrastructure represents a step in the direction of more efficient infrastructure construction. By declaring an intention to put private firms on the same level as state-owned firms in the bidding process, this is a sign that the Chinese government is slowly improving on its state driven model. Unlike the past decade of “the state advancing, the private sector retreats” (guo jin min tui), future Chinese rail development can advance alongside the private sector, thereby reducing risks of corruption.

But even if difficulties should arise, they should be put in the proper context. Any complex system will occasionally fail. As a Chinese blogger writes, the proper response in this situation is to “discover problems, face the problems, and then solve the problems.” This is normal and one does not need to condemn the entire system at the first sign of trouble, nor let the first sign of pessimism derail an entire growth story. Even if there are risks, the rewards are far greater. To channel the words of the late US president John F. Kennedy, China must invest in high-speed rail not because it is easy, but because it is hard—and because it represents a critical next step in China’s march toward development.

Follow Yichuan on Twitter at @yichuanw. His blog is Synthenomics. We welcome your comments at [email protected].

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[Franklin]

Too bad the Why the West gets China wrong thread is closed. This would have made a nice contribution there. Now we all have heard of the ghost cities in China. And this is especially a hot topic after the 60 Minutes report about this in the US. Here is a blog from someone named Wade Shepard who has traveld to all these ghost cities to see for himself what its like there. And what he has found there is far more nuanced then the alarmist view about this issue in the media.

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[solarz]

Too bad the Why the West gets China wrong thread is closed. This would have made a nice contribution there. Now we all have heard of the ghost cities in China. And this is especially a hot topic after the 60 Minutes report about this in the US. Here is a blog from someone named Wade Shepard who has traveld to all these ghost cities to see for himself what its like there. And what he has found there is far more nuanced then the alarmist view about this issue in the media.

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Actually, I mentioned ghost cities in the very first post of that thread.

Nevertheless, your link was an excellent read. It's very cool how this Wade guy actually went to China to track down the so-called ghost cities and found them to be anything but abandoned.

I think it's no coincidence that two of the so-called ghost cities are in the Henan province. My wife came from there, and I've visited a few times. Henan is one of the most densely populated provinces of China. In China, it is the norm for grown children to live with their parents until they get married. These days, many couples are putting off marriage because they cannot afford a place of their own. It is simply preposterous to think that in a province as crowded as Henan, there could be uninhabited cities!

Another interesting article:

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My wife and I actually had our wedding photos taken there. The place looked like a movie set. I thought it was some kind of a weird tourist attraction, I had no idea it was supposed to be inhabited.

To be fair, the actual "English town" is pretty small. You could circle it in a 15-minute walk. There's a pond beside it, and beyond the pond are typical apartment blocks.

 

[Equation]

Too bad the Why the West gets China wrong thread is closed. This would have made a nice contribution there. Now we all have heard of the ghost cities in China. And this is especially a hot topic after the 60 Minutes report about this in the US. Here is a blog from someone named Wade Shepard who has traveld to all these ghost cities to see for himself what its like there. And what he has found there is far more nuanced then the alarmist view about this issue in the media.

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Thanks for the post, a very interesting read. The 60 minutes report sole purpose was to do some damage (image wise) to China's miraculous urbanization and economy so that the haters can have something to blabber about online. Notice the 60 minutes never once talk to the regional government officials, investors, architects or even engineers about those "ghost cities". Those fools didn't even bother to look into the electrical power plant and to see how much wattage of electricity output as a gage for the size and usage for a newly built city. Not to mention water output and sewage capacity for waist water treatment. Because if it's a truly "ghost city" than these utilities would NOT have existed in the area in the first place.

 

[Hendrik_2000]

China is the exception among developing country. She developed comprehensive health care for the masses. The China basher always criticize the corruption and other short coming of CCP. But they also institute far ranging social security program then any other developing countries.Next toeradicating poverty health care come next

I believe health care is a civil right of any citizen. Even in US there are 50 million uninsured people.
This is heart warming article that look at the positive side of China instead of the usual pollution,corruption and food poisoning

China-Style Obamacare for 1 Billion People Saves Toddler
By Bloomberg News - Sep 10, 2013 11:00 AM CT

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A child receives medical treatment at Shenyang Children's Hospital in Shenyang, Liaoning Province. Health care would allow China to rely on more sustainable domestic demand to drive economic growth instead of investment by freeing up Chinese to spend more freely.

Toddler Wang Xiaobu was struck down in July by a motorcycle outside her home amid the rice terraces of Languan, a village deep in the mountains of the poorest part of Guizhou, China’s poorest province.
Enlarge image Hospital in Shanghai

China’s health spending per person grows at an around 11 percent a year -- the fastest growth rate in Asia Pacific, and more than triple the average growth of OECD countries, according to Mark Pearson, head of the health division at the Organization for Economic Co-operation and Development. Photographer: Kevin Lee/Bloomberg
Enlarge image Rural Clinic

A report by a think tank under China's State Council found that China’s stunning economic growth of the 1980s and 1990s had failed to improve health. Seventy percent of rural patients who needed to be hospitalized didn’t go because they couldn’t afford to pay. Source: China Photos/Getty Images

The 3-year-old was rushed by her parents past chicken coops and duck pens to the village clinic, a home doubling as a bare-bones dispensary. Xiaobu’s bloodied head was bandaged by an attendant who lacked the skills and equipment to stitch her wound or check for internal bleeding.

Four years ago, the story would probably have ended there, with Xiaobu’s parents -- unable to afford even to fix their broken mobile phone -- taking her home to recover or die. Instead, the biggest health-care overhaul in history meant government subsidies would now cover almost half their daughter’s medical bills, so they bundled Xiaobu into a borrowed van and raced 75 miles (120 kilometers) to the city hospital.

As U.S. President Barack Obama struggles to implement reforms that will extend health coverage to more of the estimated 50 million uninsured Americans, China’s 1.4 billion people are experiencing a revolution in care. Chinese leaders are betting that better, more affordable medical treatment will help defuse social tension, as well as boosting economic growth by freeing up savings set aside for possible health crises.

The benefits are flowing to people like Xiaobu -- normally a happy girl who enjoys hide and seek and picking flowers, said her mother Mei, as she waited outside her daughter’s ward in Qiandongnan People’s Hospital two days after the accident.
‘Never Cries’

“She usually never cries,” said Mei, standing in the mud-spattered slippers she wore when her daughter was hit. “She was bawling non-stop the whole way here.”

Before the Wangs were covered by the government’s health-insurance plan, the 4,000 yuan ($654) hospital bill would have been beyond the farming family’s reach. Instead, the out-of-pocket expense for the toddler’s treatment and four-day hospital stay was reduced to 2,400 yuan, which the Wangs were able to scrape together with help from friends and neighbors.

Reform rose to the top of China’s political agenda after two events highlighted how health care had failed to keep pace with decades of double-digit economic growth. In 2003, the outbreak of severe acute respiratory syndrome, or SARS, killed hundreds and threatened a global pandemic. China’s exports slumped as businessmen avoided the country, focusing attention on the link between physical and economic health.
Rural Gap

Then a 2005 study, widely covered in state media, showed the failures of China’s pay-as-you-go health care and a widening gap between urban and rural services. Seventy percent of rural patients who were referred to hospital for admission didn’t get treatment because they couldn’t afford it.

The latest round of health reform aims especially to help poor rural families like the Wangs, who are more vulnerable to catastrophic medical bills. While almost half of city-dwellers had some coverage, only 13 percent of farmers and the hundreds of millions of migrant workers did, according to the 2005 report by the Development Research Center of the State Council, China’s top government body.

A year later, the then President Hu Jintao declared that all citizens should have access to affordable, essential medical care. And three years after that, implementation of the reforms began.

“Health care is something that touches everyone,” said William Hsiao, professor of economics at the Harvard School of Public Health, and an adviser to the State Council on the overhaul. Governments “that try to maintain public support of their people have to deal with health care.”

By some broad measures, China has an enviable record for a developing economy. Life expectancy was 76 years in 2011, seven years more than in 1990 and 11 years longer than in India, according to the World Health Organization in Geneva.
SARS Legacy

China has spent the equivalent of $180 billion since 2009 to transform its health-care system. By 2010, the percentage of the population covered by three principal insurance programs had more than tripled from 2003. For the first time, more than 800 million people, 99 percent of a rural population that includes migrant workers, have access to basic insurance.

“The sheer increase of the population covered is an enormous achievement,” said Lawton Robert Burns, professor of health-care management at the University of Pennsylvania’s Wharton School.

On the flip-side, extending insurance to all China’s citizens is getting rapidly more expensive. Rising incomes and an aging population have led to an explosion of diabetes, heart disease, cancer and other chronic conditions associated with rich diets and a sedentary lifestyle.
Disease Burden

China may host almost a third of the world’s diabetes sufferers, according to a report published last week in the Journal of the American Medical Association. Based on projections from the most comprehensive nationwide survey for diabetes ever, there are 114 million adult sufferers, 22 million more than previously estimated.

Health spending per person is already increasing about 11 percent a year. That’s the fastest pace in the Asia-Pacific region and more than triple the speed of countries in the Organization for Economic Co-operation and Development, according to Mark Pearson, head of health for the Paris-based agency representing the world’s richest nations.

Government spending on health was $155 per person in 2011, from $19 in 2002, according to WHO data.

The government needs its reforms to work.

Instead of spending on flat-screen televisions, denim jeans and handbags, Chinese are squirreling away savings to pay for anticipated health expenses.
‘Brake on Growth’

“Lack of universal financial protection is a brake on economic growth,” said Joe Kutzin, WHO’s coordinator of health-financing policy. “Many engage in ‘precautionary savings,’ setting aside money, just in case.”

That practice is frustrating Premier Li Keqiang’s efforts to make China less reliant on investment that’s been the main driver of economic growth for the past decade.

The government’s extra spending is luring companies to the market and worsening an added challenge for Li: corruption.

About half of doctors admitted taking kickbacks from drug companies, a 2012 survey by the Chinese Medical Association showed. They inflate bills with unnecessary procedures and drugs, says Liao Ran, a Berlin-based senior program coordinator for East Asia at anti-graft group Transparency International.
GSK, Sanofi

In July, Chinese investigators accused GlaxoSmithKline Plc (GSK) of using cash and sexual favors to bribe doctors and health officials to promote sales, and said they were expanding their probe to other foreign drugmakers. Sanofi (SAN), Eli Lilly & Co. and Novartis AG have since been ensnared in the scandal, sometimes through accusations leveled in the Chinese media.

Johnson & Johnson (JNJ), the world’s biggest maker of health-care products, was last month ordered to pay 530,000 yuan in compensation to a distributor after a Shanghai court found two of its units guilty of monopolistic practices.

The government also expanded the list of key medicines on which it caps the price it will pay.

The drive to contain costs threatens profit margins for global companies that have flocked to a pharmaceuticals market forecast to be the biggest after the U.S. by the end of the decade. Drug sales will soar from $48 billion last year to $315 billion in 2020, says London-based research firm GlobalData, when China aims to make health insurance coverage universal.

“China is ahead of Obamacare, as they are dealing with two problems at the same time: the uninsured population and health-care cost inflation,” said Harvard’s Hsiao.
Attacks on Doctors

Besides inflating medical costs, corruption has eroded confidence in the system, leading to sometimes violent protests. Attacks on doctors by disgruntled patients have been increasing since 2008, according to a survey released by the Chinese Hospital Association last month.

Outside Qiandongnan People’s Hospital, where Xiaobu was treated, a blue and white police booth was installed in May.

There are now six guards stationed there at all times, compared with just one before, said Chen Wu, the duty officer.

“Security is much better now, so there are no incidents,” Chen said.

Pinned to a hospital bulletin board was a notice from its top official, Fang Xiaobin, setting out anti-graft steps including tougher oversight of drug and equipment purchases and medical-ethics classes. Also a poem that read, in part:

“Lust for the wealth of others brings a doctor peril;

‘‘Seeing only gains and ignoring the risks is certain to breed corruption.

‘‘Low or high, our salaries all come from the blood and sweat of the People.’’

For the Wangs, at least, the reforms have already delivered. Xiaobu received intravenous antibiotics, her head was stitched and she was X-rayed and CT-scanned to check for internal injuries beneath her abrasions and swollen face.

‘‘Our daughter is better now,’’ said her mother, as she cradled Xiaobu’s 5-month-old brother in the hospital gardens. ‘‘If we didn’t have the insurance, it would all have been too expensive for us.’’

To contact Bloomberg News staff for this story: Natasha Khan in Hong Kong at [email protected]; Daryl Loo in Beijing at [email protected]

To contact the editor responsible for this story: Jason Gale at [email protected]

 

[broadsword]

China is the exception among developing country. She developed comprehensive health care for the masses.

But other reports seem to suggest otherwise. There are not enough doctors and hospitals but long queues. I have been hoping to read more first hand account of people who reside there.

 

[Hendrik_2000]

But other reports seem to suggest otherwise. There are not enough doctors and hospitals but long queues. I have been hoping to read more first hand account of people who reside there.

I don't know where you live but if you live anywhere in Asia there will be queue at every corner because Asia is densely populated. Compare to prewar era where people live in destitute and no health care to speak, at least now there is affordable basic care . So thank god for that

 

[delft]

I don't know where you live but if you live anywhere in Asia there will be queue at every corner because Asia is densely populated. Compare to prewar era where people live in destitute and no health care to speak, at least now there is affordable basic care . So thank god for that

Or thank CCP?

 

[nugroho]

Or thank CCP?

Please explain the relation between health care for densely populated Asia and CCP