05.14.08
Posted in China, Economic Analysis, Oceania Cruise at 3:59 am by Administrator
Taiwan made an important historical choice on March 22 when it elected Ma Ying-jeou, former Nationalist party mayor of Taipei, as its new president. The country is well along a path as a mature democracy, putting back in power the party that had been associated with the dictatorship of Chiang Kai-Shek. Ma won handily 58 to 41% as the electorate strongly supported his policy of closer ties to Beijing.
The Taiwan economy finds itself in a peculiar place. The self-imposed limits on doing business with the mainland, which date back to the Cold War, had limited economic opportunities. It is estimated that almost a million Taiwanese live again in the PRC, with the largest concentration in Shanghai. On paper, Taiwan is the number three foreign investor in the mainland but many independent observers believe that the amount is much larger since Taiwanese companies have had to resort to setting up shell companies in Hong Kong and other countries to get around the official limits on investment in the PRC. Taiwan’s growth this decade has been strong, but many look with envy toward the explosive growth on the mainland. With a higher level of English literacy, Taiwan should be a portal, not a detour, to doing business with China.
My visit to Taiwan occurred two weeks after the elections. The country seemed confident of moving ahead, but like its neighbors it has to deal with the problems of pollution and congestion. The freeways and major highways, many of which are now 40 or 50 years old, are clearly inadequate. But the living standards are clearly on a par with the other Asian democracies and this most recent election bore testament to the strength of democracy in Taiwan, something was in doubt up to only a decade ago.
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05.04.08
Posted in Economic Analysis, Oceania Cruise at 11:16 pm by Administrator
On the Oceania Cruise, we stopped in Hiroshima, Kobe and Okinawa. Kobe offered insights into Japan’s economy. The area has always been a major sea-port and the new airport juts out into the Bay. We took the latest, fastest and most energy-efficient version of the bullet train to Kyoto. It is another symbol of the technical prowess of Japanese engineering. Compared to the German, French or Spanish fast trains, the Japanese one is quieter; the connections between cars are hardly noticeable; the overall feel is smoother. While the latest version of the bullet train goes 5% faster, it uses 35% less energy due to aerodynamic features.
The major change that I noted since my last visits to Japan is the increase in upscale spending. Kobe has always been noted as a sophisticated city and the department stores in the city center carried all of the world noted luxury brands. You could see that orinary citizens dress well and wear brand-name accessories.
Japan emerged from the doldrums of the 1990’s by making some tough economic reforms. The government streamlined both regulation and the bureaucracy. The banking sector wrote off many bad debts — including real estate loans that had been on the books for years. (I would encourage our economic policy makers in the US to look at that example. The current trend is to postpone the day or reckoning in the US.) All of the changes and reforms coincided with the global upswing from 2004-2007 and Japan prospered. Most importantly the ratio of exports to GDP rose significantly during the period. Japan had returned to its traditional export-led economic model, except that this time it was without the heavy-handed “guidance” from the Ministries in Tokyo.
As I noted before, Japan is spending its money on consumption, moving it a bit closer to the US model. The Japanese are now enjoying the fruits of their hard work. In the pure economic sense, saving too much (Japan over the past fifty years) is a drag on the economy as well as saving too little (the US since the 1980’s). Allowing the markets to find balance is everything in economics
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Posted in Economic Analysis, Oceania Cruise at 11:16 pm by Administrator
On the Oceania Cruise, we stopped in Hiroshima, Kobe and Okinawa. Kobe offered insights into Japan’s economy. The area has always been a major sea-port and the new airport juts out into the Bay. We took the latest, fastest and most energy-efficient version of the bullet train to Kyoto. It is another symbol of the technical prowess of Japanese engineering. Compared to the German, French or Spanish fast trains, the Japanese one is quieter; the connections between cars are hardly noticeable; the overall feel is smoother. While the latest version of the bullet train goes 5% faster, it uses 35% less energy due to aerodynamic features.
The major change that I noted since my last visits to Japan is the increase in upscale spending. Kobe has always been noted as a sophisticated city and the department stores in the city center carried all of the world noted luxury brands. You could see that orinary citizens dress well and wear brand-name accessories.
Japan emerged from the doldrums of the 1990’s by making some tough economic reforms. The government streamlined both regulation and the bureaucracy. The banking sector wrote off many bad debts — including real estate loans that had been on the books for years. (I would encourage our economic policy makers in the US to look at that example. The current trend is to postpone the day or reckoning in the US.) All of the changes and reforms coincided with the global upswing from 2004-2007 and Japan prospered. Most importantly the ratio of exports to GDP rose significantly during the period. Japan had returned to its traditional export-led economic model, except that this time it was without the heavy-handed “guidance” from the Ministries in Tokyo.
As I noted before, Japan is spending its money on consumption, moving it a bit closer to the US model. The Japanese are now enjoying the fruits of their hard work. In the pure economic sense, saving too much (Japan over the past fifty years) is a drag on the economy as well as saving too little (the US since the 1980’s). Allowing the markets to find balance is everything in economics
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04.29.08
Posted in China, Economic Analysis, Oceania Cruise at 4:28 am by Administrator
On the surface, China remains a Marxist-Leninist state. Yet the economic system has lost most of its ideological content. Here are a few scenes:
At the Temple of the Jade Buddha, monks chant while the courtyard is filled with ordinary people — old and young — burning incense sticks that waft their prayers above.
The Maserati dealer shows off a beautiful yellow sports coupe and competes with the Ferrari dealer next door. 
Meanwhile, outside the street vendors, those peasants from the countryside without work visas for the City, make a few Yuan shining shoes or selling trinkets. Meanwhile down the road, the Shanghai Aesthetic Surgery Center does a booming business.
The City boasts incredible vistas with daring buildings. Yet if you look up towards the sky, the view is obscured with hundreds of wires. Wireless communications have supplanted the old telephone lines but what to do with the legacy of the communist rule?
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Posted in China, Economic Analysis, Oceania Cruise at 3:25 am by Administrator
Sailing into Shanghai’s harbor was an amazing sight. By the entrance from the ocean, the banks of the Yangtze River were littered with the relics of the heavy industry investments of the Central Planning years under Mao and early years of Deng Xiao Peng. As we grew closer to the City, newer construction started to appear. When we rounded the final corner, the massive and daring buildings of new Shanghai appeared.
Shanghai is busy and bustling. As you look up and down busy Nanking Road, people are everywhere, shopping and carrying out business. Along the way, buildings from the Mao era and from before the revolution are being gutted and restored. New highrises are going up by the dozens.
Beside the new Shanghai, there are symptoms of other social problems. The Chinese authorities attempt to slow the rural to urban migration by requiring work visas before the peasants can look for work in the City. As a result, there is a vigorous informal economy. Along the waterfront by the Bund and Nanking Road are hundreds of street vendors selling all manner of goods. We got a number of “Mao” watches with the face of the Chairman and a waving hand — taken from the wind-up Mickey Mouse watches we had as kids.
As with all the cities on our Asia journey, traffic is overwhelming. New freeways are going up but there are already too many vehicles. One can smell the exhaust everywhere. While the new cars must meet strict standards, every effort is made to keep older vehicles running, particularly for delivery vehicles.
Shanghai is the symbol of new China – rapid growth, highly populated and facing major environmental challenges.
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03.26.08
Posted in Cross Cultural, Logistics, Oceania Cruise at 12:32 pm by Administrator
South Korea has moved into the developed country category. You can see it in Seoul not only in the impressive skyline but also in the incredible shopping districts. The stores were filled with shoppers at mid-day on a Wednesday and the young population seems confident in their own future. This is still the land of the small shopkeeper and the mega-retailers have had limited success. On the way to and from the port of Inchon to Seoul, you could see the small hardware and grocery stores that line the sides of the main highways.
Seoul is largely built out but there is incredible amount of in-fill development and renovations to structures that were built during the go-go years of the 70’s and 80’s. The heavy manufacturing locations have largely left the city but there are nevertheless quite a large number of decaying factories. It’s ironic that a country that made its debut on the world market as a low-cost labor country is losing business to countries with even lower wage costs.
One common thread of all of the East Asian countries is dealing with congestion. Seoul, with a metropolitan area population of 23 million, faces gridlock 24/7. The same challenge faces Japan, Taiwan and China. Beijing, with a rush to finish infrastructure, has traffic jams throughout the city. As with other cities around the world, you can’t seem to build enough highways or public transportation to meet the demand for additional time. The same is true on the US side – - because of the deteriorating state of the interstate routes and railroads, congestion is lengthening time to move goods from the port to the final destination.
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Posted in Logistics, Oceania Cruise at 12:30 pm by Administrator
Today is an at-sea day for the cruise. What struck me was the huge volume of inter-coastal freighters going from Japan and Korea to Tianjin. I presume this reflects the flow of semi-manufactures to China for final assembly.
Over the past five years, the economies of East Asia have prospered as interregional trade has increased. Given the geography of the area, goods flow by these small freighters using the Yellow Sea. The more apparent route from Korea to China by land is blacked by North Korea. In addition, the Chinese rail system is largely focused on the movement of people, not goods. Thus the solution is that goods are shipped by container on these small coastal freighters. This trend will likely intensify as manufacture and investment flows become more intertwined over time.
China has financed an incredible expansion in its highway system by using toll roads, at fairly steep prices for a developing economy. In California, the current debate is on expanding the roads leading out of the ports. The state passed a multi-billion dollar bond package to relieve port congestion. Maybe we should be investing more in toll roads? After all, we’re just at the other end of the Yellow Sea Asian Highway.
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Posted in Economic Analysis, Oceania Cruise, Trade Policy at 12:28 pm by Administrator
It is certainly busy times for China. Flights across the Pacific remain full, despite the run-up in oil prices. Those on board the flights include businessmen and more importantly China is a burgeoning tourist destination (in fact a bargain compared to Europe in these days of the plummeting dollar).
From the airport to the port at Tianjin revealed the explosion in infrastructure spending. There were literally hundreds of apartment buildings or new factories under construction. The construction at the Tianjin airport zone continues, supplementing the dozens of existing structures.
The new apartment boom continues apace with 20 and 40 story structures rapidly going up. In the mean time, the shoddily constructed structures of the Mao era, particularly in Tianjin, are being abandoned and torn down.
The highway from Beijing to the port was chockablock with trucks carrying containers to the port for export to the US and the rest of Asia. There were almost as many trucks coming from the port. China has increasingly become an assembly location for consumer goods being designed in Korea and Japan. Both countries already have major automotive assembly operations in the country and the streets have brand names from US, Germany, Japan and Korea. (While I was Consul General in Hamburg, I had a tour at the VW factory in Wolfsburg and then VW CEO Piech underscored the growing importance of the Chinese market to their global operations.)
As we went down the highway, I was thinking about the volume of new construction and what might happen if there is a slowdown. These apartments are being built on the assumption that the economy will continue growing at a 10% growth path. There are two possible scenario for the slowdown – exports to the US fall as the US economy cools or China pulls the reins in on the economy after the Olympics. One only needs to remember the decade of the 90’s after the Japanese boom collapsed. So, how will China’s new found banking system deal with an eventual slowdown?
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03.06.08
Posted in Oceania Cruise at 4:39 am by Administrator
I’ll be the enrichment lecturer on Oceania Cruise Line’s Nautica which will sail from Beijing on March 24. Other ports along the cruise include Inchon (Seoul), Shanghai, Hiroshima, Kobe (Kyoto), Okinawa, Taipei and Hong Kong. The topics of my lectures will concern business and politics in the above nations. I’ll be blogging from along the way talking about my impressions of these burgeoning Asian nations. For more information about the cruise see OceaniaCruise Lines. Send me your questions over the next few weeks.
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