Brad Setser

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Forget Unocal. China really wants Intel

by Brad Setser
July 27, 2005

At least that is what "John Rutledge, a former economic adviser to President Bush" thinks. 

To maintain its competitive advantage, Chinese companies must acquire technology that will make the country more productive — the real key to improved living standards.  That was the thinking behind Chinese computer giant Lenovo's purchase of IBM's (IBM ) PC division earlier this year (see BW Online, 5/9/05, "Lenovo and IBM: East Meets West, Big-Time"). It wasn't for the brand, which Lenovo only can use for a few years. It was all about the technology, according to Liu, who heads up the company's China business.

Bigger tech deals are on the way. "Chinese companies need to acquire top-tier technology in the U.S. and Europe. Buying second- and third-tier companies doesn't really help, because they don't boost productivity. What they really want to buy is Intel (INTC )," Rutledge says.

"They" also rather clearly won't be allowed to buy Intel, no matter how much of China's $750 billion in reserves is made available to Chinese tech firms. To be fair, the Business Week story goes on to make a set of far more reasonable points – in the near term, China will buy only smaller tech companies and China political system almost certainly would have to evolve before a Chinese firm can buy one of America's corporate crown jewels.

There is a strategic case that the US should let China buy Unocal.   China, after all, is emerging as a major oil importer – and compared to European and American majors, Chinese oil companies have relatively few offshore assets.  Sharing the oil pie – and getting paid for it – is a way to accommodate a rising China, a reasonable part of a broader "engagement' strategy.   Better for China to prospect for gas on the New York Stock Exchange than in Tehran, so to speak. 

As Lael Brainard and Michael O'Hanlon note:  

China's share of global oil production is modest and well below what it needs for its own consumption – a useful benchmark for assessing potentially troublesome dominance. Unocal accounts for much less than 1 per cent of global oil production (China's total assets account for well under 10 per cent). Rather than seeking domination of world oil markets, Chinese leaders probably want assurances over their energy supplies given their economy's extreme dependence on the resource. Moreover, given the amount of dollars we are putting in China's pockets through our enormous appetite for imports, we should not be surprised that Beijing would seek higher yielding investments than Treasury bonds.

Intel is a whole different story.  I think it would fit in the first two categories that Brainard and O'Hanlon set out – crucial technology and more specifically crucial computer technology.   

O'Hanlon and Brainard also focus on the real issue: the United States' growing overall financial dependence on a country that is neither democratic nor a US ally. 

The final benchmark is the question of overall economic dependence. Leaving aside the specifics about what trade the US carries out with China, it is not prudent to allow a huge share of the US economy to depend on favourable future political relations with one of the world's last great autocratic states. Although overall imports from China account for just 2 per cent of US gross domestic product, the nation depends heavily on China to finance its deficit. China's recent loosening of the renminbi is not likely to change the situation dramatically.   … The Unocal bid has sparked a sobering debate on how much of the US – and the world – we can safely see controlled by a communist regime with a claim on Taiwan that the US is not prepared to concede and could well fight to oppose. Few issues will be as important or intellectually challenging for American policymakers in the ­decades ahead.

The Rutledge quote is not the only off the wall comment from a current or former government official that caught my eye this week.

I cannot believe that any member of China's monetary policy committee truly believes that China's capital controls are all that stands between China a massive depreciation, like other Asian currencies in 1997-98.

China won't make its currency fully convertible for at least five years because it worries hedge funds may force the yuan to plunge, much as happened to the Korean won and Thai baht during the 1997 Asian financial crisis, said Li Deshui, a member of the central bank's monetary committee.

“There's more than $800 billion to $1 trillion of hedge funds in the world and the Chinese financial system is relatively weak,'' Li, 61, said in an interview. “If the (yuan) becomes fully convertible it would be attacked by these hedge funds.''

Li is right, without controls, China would be attacked. But by hedge funds betting on a revaluation, not a devaluation.  I don't think many funds would follow Lushkin's advice on this.  China – unlike Thailand, Malaysia, Indonesia and Korea back in 1997 – is running a rather significant current account surplus.  All the crisis countries were running deficits.  

There is a reason why every Chinese official in the world seems to be trying to discourage "speculation" on further RMB appreciation right now.

To be fair, right now China's controls both prevent Chinese residents move their savings out of the Chinese banking system and western residents from buying most Chinese financial assets (onshore assets that is).   I will speculate on the likely impact of a full lifting of the controls at another time — but the debate is rather academic. As Li notes, China is not going to drop its capital controls anytime soon.  

No matter.  right now, it is fairly clear that China's controls currently serve to keep foreign – and even Chinese — money out, not to keep Chinese money at home.  Chinese citizens took money out of China in 1998 and 1999 – they anticipated the RMB might be devalued along with other Asian currencies.  That changed, big time, starting in 2001.  Since then, more hot – often Chinese — money has tried to get into China than to get out.  Chinese citizens with onshore dollar deposits are shifting their savings into RMB.    Chinese citizens with funds offshore (illegally) are moving them back (illegally) into China, even if that means placing their funds in "bad" banks. 

And to be honest, the risk of having a deposit in a state owned bank is a lot smaller than some commentary suggests.  So long as the Chinese government stands behind "its" banks, depositors won't take any losses on deposits in "bad" banks.  Remember: the US had a lot of bad "S&Ls" for a while.   China's taxpayers, not China's bank depositors, are likely to be left with the bill for its bad banks.


  • Posted by MTC

    Rutledge – “What they want to buy is Intel.”

    No “they” do not. What would a Chinese company do with Intel? Intel’s value arises from the potential residing inside the heads of its scientists and engineers–not one of whom would stay to serve the new Sinitic masters.

    A pox on anyone giving this man money to manage.

  • Posted by MC3

    Agree with you MTC. Just look at Cisco/3Com case agains Huawei. China does not need the companies itself. Just the guys that make possible the use of the technology. They can afford a trial after they got strong, and surely they will pay a lot. Microsoft is the best example.

  • Posted by Stormy


    Of course China would want to buy Intel. But aint in the cards. We know that. These are economists talking.

    Now, what about AMD, which is always nipping at Intel’s heels?

    You are right, however, that any country that buys Intel better make sure that it has the brains and intellectual capital available to keep it purring into the future. This is one case where “real knowledge” and expertise AND top-flight feeder educational system, is gold. This is not Maytag or the PC or a car.

    China would be better right now to try to leap-frog the technology in key areas–which is what everyone tries to do anyway. Build the universities, fund the research into research and advanced technologies. And this does not mean just engineering schools.

    And don’t be short-sighted and measure it in bucks. (I still can’t get over that firms here are trying to corral the research bucks away from universities.) And don’t let the technology simply be a by-product of your military ambitions.

  • Posted by dryfly

    :::Intel is a whole different story. I think it would fit in the first two categories that Brainard and O’Hanlon set out – crucial technology and more specifically crucial computer technology.:::


    I am sorry but this whole discussion makes me want to laugh… the Chinese don’t need to buy Intel to get all there is to know about this technology… All they need to do is make sure to get a few of their own people in the plants that Intel is already building in China…

    I am serious and anyone who is a halfway decent engineer will tell you likewise… you don’t need to own the company to get the technology assuming you ignore int’l IP law… all you need to do is get the right people in position to get access and they learn everything there is worth while knowing.

    I hear horror stories like this all the time from clients & contacts with plants in China. You might think the wage slave feeding parts into a machine at your Chinese plant just got off the turnip truck from Wuhan… but in reality the guy might be PhD in Electrical Engineering taking notes… And IP property what it is there… how are you going to stop him once he has the recipe for the ‘secret sauce’ in his head.

    I know of at least one case I’m not at liberty to go into (get a buddy in trouble) where a US company opened a plant in China to build an innovative product (patented technology) that was designed in the US under lock-n-key…

    The Chinese plant supposedly had the best security you could get in China… Supposedly had the support of the Chinese gov’t to see to it the IP would be protected. Product was built and went into testing… and before they even got the product formally launched had ‘Chinese copies’ from Chinese competitors in the marketpalce priced 40% under their launch price… identical technology. They are still fighting the IP pirates in China (and losing).

    My buddy said they are sure there were industrial spys in the plant… No surprise since it is almost impossible to carefully vet employees in China.

    I get emailed newsletters almost everyday on the chip, disc drive, component industry… there are tons of these plants in operation and more being built… they are so deep into China already that the only reason China would even want Intel is for the ‘Brand Name’ only… In a few years there will be nothing Intel does that China couldn’t do if it wanted – with or without Intel. I just hope by then that WE can still make chips, design drives and write software. There is no guarantee we will be able to.

    Folks – on this one the horse is out of the barn and in the next county.

  • Posted by dry fly

    Stormy gets it…

  • Posted by PC

    “To maintain its competitive advantage, Chinese companies must acquire technology that will make the country more productive — the real key to improved living standards. That was the thinking behind Chinese computer giant Lenovo’s purchase of IBM’s (IBM ) PC division earlier this year (see BW Online, 5/9/05, “Lenovo and IBM: East Meets West, Big-Time”). It wasn’t for the brand, which Lenovo only can use for a few years. It was all about the technology, according to Liu, who heads up the company’s China business.”

    Anyone who thinks there is any productive cutting edge technology in assembling PCs must be from another planet. Do you think the boys on the hill would have approved this deal if there really is valuable technology?

    And to think that China must buy or steal technology from the west implies the west has a long term dominant advantage in innovation. Maybe the west will dominate in the short term but long term the field is wide and open. Don’t forget that China invented the gunpowder, the compass, and paper. So this is a race with a proven innovation track record. And don’t forget that over one third of tech engineers in Silicon Valley are either Chinese or Indians. A lot of them are returning home now as their countries offer more opportunities.

    So in the long run the west may need to buy or steal technology from China and India.

  • Posted by MTC

    All –

    Cutting edge microprocessor design is the work of thousands of the world’s brightest engineers, programmers, mathematicians, materials scientists and electrical engineers–all of whom are keeping close tabs on blue-sky work being carried out in universities and institutes the world over. It is the product of visionary leaders, possessing not only the highest levels of technical knowhow but also a fervent belief in the moral value of their activities.

    It is unlikely that any one country, even ones with populations as great as those of China or India, could supply the personnel for an indigenous Intel or an AMD. It is also unlikely that attempting to take a shortcut, converting a knowledge enterprise like Intel into a tool of a particular nation’s economic development would result in anything but the runaway fission of the company into inert or depleted parts.

  • Posted by Michael Robinson

    Godson 2 lays foundation for China’s processor industry

    By Wolfgang Gruener, Senior Editor

    July 25, 2005 – 15:25 EST

    San Jose (CA) – It’s time for US microprocessor developers to pay attention to China not only as target market but also as potential competitor, market research firm Instat says. While Godson 2 isn’t China processor debut, it could be the first chip to reach global markets.

    Sometimes, copying existing successful products may prove to be much more efficient to reach a certain goal rather than trying to reinvent. In fact, in many industries it is common practice to improve or even create one’s own product. And, according to a report released by Instat analyst Tom Halfhill, the microprocessor industry could see such a trend emerging in China – to help the country to quickly catch up with US-based companies.

    Halfhill said that the “Godson 2”, a 64-bit chip that went into production in the second quarter of this year, demonstrates that “China is capable of designing world-class microprocessors.” However the chip appears to be what many may call an entirely new design, as the Godson 2 is 95-percent MIPS compatible and very similar to the MIPS R10000, which was introduced in 1995. According to Halfhill, the legal situation between the Godson 2 and the R10000 is unclear as the Chinese chip leaves out certain instructions patented by MIPS. But the analyst said that MIPS is especially concerned about the fact that “the Chinese are referring to the Godson 2 as MIPS-like.”

    At this time, the Godson 2 looks like it is no threat to leading processor manufacturers. The chip is more sophisticated as the Godson 1 that debuted in 2002, but the processor trails current processors by at least two generations, Halfhill said. While current CPUs are built in 90 nm and soon move into 65 nm processes, the Godson 2 is manufactured in 180 nm. “Processor manufacturing is an eluding target, but China could catch up with leading manufacturers within five years,” Halfhill said. “There is no reason to be concerned about the processor right now, but it is certainly a trend to keep an eye on.”

    Godson 2 availability is currently limited to China, but the manufacturer, BLX IC Design, aims for markets outside the US. The chip targets embedded applications such as DVD players. According to Halfhill, the Godson 2 lays the foundation for China’s microprocessor industry: “China’s “ambition to make its own microprocessors will affect microprocessor vendors all over the world,” he said.

  • Posted by jm

    dryfly, while I believe you are right on in your 21:49:17 comment, I think the danger is not as great as some might conclude based on it. Although unscrupulous businessmen can dispatch spies to steal technology that is fully developed and ready for production, the same defects of character that lead them to such behaviour often render them unable to build an organization that can innovate on its own, constraining them always to a parasitic existence vulnerable to countermeasures by their prey. Is the company whose technology was stolen likely to take their next generation of technology into China (assuming they survive the predation)? Probably not, and if the technology thieves are unable to start innovating competitively from the stolen technology base, they’ll be left behind. (Please note that by writing, “the danger is not as great as some might conclude …, ” I am not trying to say that this is not a very serious problem, only that we are not doomed — the Japanese stole a lot of technology from us in the past, but we survived.)

  • Posted by psh

    Yup. Industrial espionage is part of China Inc.’s core competence. Lots of people dispatched here to find one teensy fact apiece, and if you set foot in China you’re transparent as glass.

    India too. Their expats here have made a lot of money on industrial espionage, not just for chums back home but for Japanese & US firms. Thinking of one amusing acquisition by a top-flight consulting firm that shat a brick when they learned what they had bought.

  • Posted by dry fly

    :::It is unlikely that any one country, even ones with populations as great as those of China or India, could supply the personnel for an indigenous Intel or an AMD.:::

    Both China & India are big enough to do it… just not wealthy enough… yet. They don’t need to do all the research, don’t need to have raised & trained all the talent… they just need to have the ‘core’ then import the peak talent. Most of these technologies are based on thousands and thousands of little bits of ‘standard proprietary application ‘ of well understood principles sprinkled with some very deep & focused true ‘cutting edge technology’… it is the application of the little bits of cutting edge that differentiates the commodity product from the innovative one… the key is knowing which is which and where it all fits. The Chinese are ‘there’ now in things like disc drives & chips… The Indians are ‘there’ now in software. All they need is the sprinkling of the cutting edge. If our companies underestimate them then they are fools.


    :::dryfly, while I believe you are right on in your 21:49:17 comment, I think the danger is not as great as some might conclude based on it.:::

    The danger is only ‘huge’ once they have the infrastructure to exploit the knowledge… It wasn’t a big risk even five years ago. It is now. They need to tighten up and a lot and do it now.

    The first and most important thing they need to do is make sure the application of the cutting edge ‘future meal ticket’ technology is fully under wraps. If they can’t assure the security of this stuff in China…or India… then don’t make the stuff there. Just that simple.

    But then the quarterly reports won’t look as fluffy… and the bonuses smaller… without the ‘free labor’ and facility subsidies in China… GADS! Can’t have that!

  • Posted by Guest

    or buy GE! (or westinghouse 🙂

    i think why the ‘who-will-the-chinese-buy-next’ game is so provocative is because it’s obvious they have ambitions beyond the factory-floor for the world;* they want to absorb more of the global supply chain by acquiring more value-added assets, either organically or thru accretion… as it stands, they are squeezed by the ‘IP’ holders/gatekeepers on the one end and the monopsonist wal-marts of the world at the other — i.e. MNCs are capturing the bulk of the profits!

    so if science/R&D/technology is the key to transitioning to higher margin businesses, i think they probably also recognise that capital discipline, legal institutions (à la de soto 🙂 etc are req. to unlock it so as to begin the ‘long march’ up the the rising per capita wealth-generation ladder, which btw is why i find it hard to take seriously the chinese military ‘threat’, except perhaps in the geostrategic sense of resource control**

    btw, re: “Li is right, without controls, China would be attacked. But by hedge funds betting on a revaluation, not a devaluation.”
    an interesting opposing view (if not for controls 🙂


    *instant companies – “Business 2.0 discusses the drastically reduced barriers to entry for designing, manufacturing, marketing and distributing new products. The combination of Web collaboration platforms, outsourced design and outsourced manufacturing (typically in China) are changing the landscape dramatically.” [via infoproc ;]

    **the global resource wars! – “China’s quest for energy resources on the world stage is creating a destabilizing effect on international and regional security. Fueled by the lack of a coherent multilateral approach to energy security in Asia and by China’s already tense relations with neighboring states, the competition for energy resources may prove to be the spark for regional and international conflict. In many cases, China is vying for energy resources in some of the most unstable parts of the world. Its involvement in regions with raging conflicts could potentially draw it into the disputes, escalating a regional conflict into an international conflict.” cf.

  • Posted by brad

    guest (formerly glory?) — thanks for the links.

    i need to read the investors’ insight/ maudlin thing in more detail. the euro carry trade bit i agree with — but the asian reserve accumulation data seems the be presented in a selective way. China is left out — and as anyone who reads this blog knows, global reserve accumulation has shifted from being an “all of east asia’ game to a China, russia and oil game. But with China’s reserve accumulation on track to reach close to $300b, “Asian” reserve accumulation has not stopped. China alone won’t equal China, korea, taiwan (still adding to its reserves) and japan from last year. mostly because Japan was big. but russia and the oil exporters are adding a lot more to their reserves this year than last year too.

  • Posted by brad

    interesting discussion. am not a techie. far from it. but doesn’t intel also have some skill hooking up a bunch of processors (pentiums or whatever) into a massive parallel design that replicates the performance of classic supercomputers? probably have some terms off, but my sense was that intel did a few more things than design the high value added “brain” in the average PC.

  • Posted by tamara

    “China really wants Intel” – if it gets it, can it digest it / really make profitable use of this acquisition?
    Reportedly, IBM’s PC division had been making losses, while the PCs were assembled in China anyhow. So no further cost savings by moving production to China. TCL’s acquisition of Thomson wasn’t exactly a boost to profits either. Bottom line: Mergers / acquisition, especially cross-border ones are notoriously difficult to digest for an organisation. But with too much money on your hand you don’t care, you buy, even when it’s your own high demand (as e.g. for oil) is driving up prices of acquisition targets. – As long as state banks finance this, it’ll probably work, but some point they just might demand back their loans.

  • Posted by sun bin


    It is called parallel computing (or distributed computing). That skill is not to duplicate. Google’s founders (as graduate students in Standford) did it at their own dorm before they got VC investment.

    But as discussed, it is not difficult to poach individual technology as they reside in people’s brain. It is also hard to steal an immense project like cutting edge microprocessor design.
    I also believe US already have the legistration limiting the export of high processing power CPU to countries like China. Although such law are very outdated. What were strategical in the 1970s or 1980s can be accomplished by any computer bought in Bestbuy today.
    The fastest computer was actually designed by engineers in IBM lab (the portion NOT sold to Lenovo).

    IMHO The most likely path for China to acquire advanced technology is the Taiwan way, luring returning PhD with business opportunities. Acquisition will serve as getting proprietary technology (patent protected, or complicate processes) in more mundane industries and to enter the world market. In this case it is better to let China play to the rule of the game than blocking it (forcing its companies to steal).

  • Posted by sunbin

    That skill is not “DIFFICULT” to replicate
    — typo above

  • Posted by sun bin

    I see the “better” (and untold) purpose of merger as eliminating competition.

    HP/Compaq, Lenovo/IBM, Haier/Maytag or Whirlpool/Maytag…

    (that is why Whirlpool/Maytag will got to the FTC for review, so was Exxon/Mobil)

    Haier tried to bid against Ripplewood because Ripplewood is not in the business and is reviving a failing competitor. When Whirlpool comes in for the bid, Haier happily retreated and whish Whirlpool win. Even if that means a stronger enemy at Whirlpool, it is still better than fighting 2 enemies in the market, one of them selling at a lost.

    So I think Haier’s play on Maytag is quite smart and also quite successful.

  • Posted by dry fly

    :::interesting discussion. am not a techie. far from it. but doesn’t intel also have some skill hooking up a bunch of processors (pentiums or whatever) into a massive parallel design that replicates the performance of classic supercomputers? probably have some terms off, but my sense was that intel did a few more things than design the high value added “brain” in the average PC:::


    I don’t know but ‘parallel processing’ hasn’t been new since Ronald Reagan was President… I had buddies who programmed the operating systems for those ‘super computers’… Think ‘Cray’ & ‘Control Data’ and a start up called ETA & a couple Japanese companies also got involved (Fujitsu I believe)… it has been a while.

    The only thing that made them so expensive then was…

    (1) low volumes & high overhead => high cost
    (2) NOTHING was standardized or commodity
    (3) proprietary one of a kind software

    But by the mid-90s midsized semi-commodity parallel systems were already available that encroached on these supers… I think a beefed up IBM AS 400 was the ‘prototype’ for this but geeks would know. Anyway now servers & networks with the right software do almost the same thing.

    The commoditization of this industry has driven cost out and made the products available to almost everyone. The thing is that what Intel now does is not really ‘cutting edge’ in the sense that a break through will change the world… change it in a ‘schumpeter’ like way … revolutionize the way we live. When chips first hit it was a revolution… now it is evolution.

    But although no longer revolutionary technology, the companies like Intel & the technologies they use & products they offer are very important to preserving our way of living NOW… that is if we plan to continue to live at or above middle class. It is the ‘base’ we will need to provide the resources to prepare for the next big long wave of innovation… whatever that might be.

    We need to be plowing some of the wealth from the Intels & their high paid workforce back into education, basic research & infrastructure HERE to lay a fertile field for the next wave to take root HERE and not somewhere else.

    Offshoring not only destroys the wealth available for us to reinvestment in those basic studies & systems here, it also makes the fields OVER THERE more fertile. I wonder if they will be that generous when they hold the technology.

    BTW – if you look at the economic history of the automobile you will see it was every bit as revolutionary & strategic as IT is to us today. You will also see that the initial developments in the internal combuston engine took place in EUROPE… but we in North America hijacked the technology and the biggest economic benefit of that technology.

    There is no guarentee the next big thing will launch or stay in America. Especially considering our policies (lack of saving, basic research, general technical illiteracy, etc.). Socio-economic suicide.

  • Posted by Stormy

    Massive parallel processing is usually designed to solve very specific large problems, each processor having its own task. The actual CPUs are often nowhere near the level of those in a Cray machine. But, by hooking enough PC’s together, and slicing and dicing the programming tasks, the result is a brute force attack on a very large intractable problem.

    Right now, that kind of processing is being used to bring together thousands of internet computers to tackle a problem: SETI, everyone knows.

    More importantly, it is being used to tackle the issue of global warming. The results of the latter have been impressive—and perhaps unachievable any other way, given the present level of technology. Not even a Cray machine can approach this monster of a problem so cheaply.

    I agree with dryfly.

    The road ahead is through research and topflight schools. And the research has to be in more than just IT.

    The relationship between IT and other scientific disciplines is synergetic; they do feed and push one another. All science is being pushed here. But if you do not have the research in other areas of science, you have a great airplane but nowhere to go with it.

    IT is merely a tool. That is all.

    Don’t forget the disciplines of those who use it, economics included.

  • Posted by Stormy

    While I am on this subject, one in which I have been engaged for a number of decades…and using it just as I have said: in conjunction with a totally different discipline…let me make a suggestion…or maybe it is a series of questions, since economics is not my field. Do economists

    1. Gather teams of programmers and systems analysts together to attack problems?
    2. Learn real programming skills to tackle problems of particular interest to themselves?
    3. Insist that data on the internet or from sources be made available in a form for down-load and easy manipulation. And here I mean something more than spreadsheets with all the latest add-ons.
    4. Collectively get together to discuss IT issues they have…or that they would like to see solved? Regulatory body of some sort? Done officially, just like the IEEE?

    I am sure the answers are “yes.” But I am curious if they do these things…and whether they are given the financially resources and IT talent to do these things.

  • Posted by Stormy

    Sorry, I cannot stop even there. But I will be quiet after this, I promise.


    Remember your excellent rejoinder to movieguy’s argument: dollars as a measure of trade can be misleading if the dollar value has fluctuated over time?

    Now, I found that site really interesting until I thought about what you said.

    Why doesn’t that site understand the issue you raised? Obviously, some one uses the information. And they have collected massive amounts of information! Why hasn’t the appropriate adjustments been made?

    A economic regulatory body would set the standard so that information was useful and meaningful across the board.

    This was a WTO site!

  • Posted by sunbin

    So, i think, (to Stormy’s comment on WTO’s data), WTO site should not make the calculation/interpretation itself.
    Instead, it should make the data ‘calculation friendly’ (like you pointed out in your earlier post — in Excel or DB, instead of in PDF!). So that one can do his own conversion to suit one’s particular problem.

  • Posted by cranagh

    somewhere i have seen a list of multinational companies that made campaign contributions to politicians at election time. surely those are the companies they will not be allowing china to buy ? but how would you feel about the candidate if xxxxxxx corporation was taken over by the chinese and (a) cut off or (b) – worse, continued the regular contribution ?

  • Posted by cranagh

    ‘cranagh’ is me, gillies. something to do with free subscription form filling. i am also the blogger of

  • Posted by progrolib

    Is this the same Rutledge that ran the Claremont Economic Institute during the early 1980’s? If so, he was one of those telling President Reagan that we could quickly reduce inflation without a recession.

  • Posted by Guest

    japan wants to build 10 petaflop supercomputer – “Japan wants to gain the fastest supercomputer spot back. Japan wants to develop a supercomputer that can operate at 10 petaflops, or 10 quadrillion calculations per second, which is 73 times faster than the Blue Gene. Current fastest supercomputer is the partially finished Blue Gene is capable of 136.8 teraflops and the target when finished is 360 teraflops.”

    i think it has to do with vector versus scalar processing, like i think some problems are suited to one or the other, and so depending on the architecture they can be either relatively cheap ‘COTS’ or more expensively custom-designed 😀

    also btw iirc, s.korea recently put in place legislation limiting ‘IP’ transfer of ‘sensitive technology’, i guess sorta similar to the defence review board the pentagon has on certain ‘dual-use’ technologies… there’s also been talk of expanding their powers to include a veto on any foreign M&A activity, which would go much beyond mere export controls… puny export controls!

    oh and re: “hard to steal an immense project like cutting edge microprocessor design” 😀

    china releases 2nd generation MIPS chip – “The Godson-2 or ‘Dragon’ went into production last week. News reports indicate that, ‘The CPU is 95% MIPS compatible using an unauthorized and unlicensed variation of the MIPS architecture, which is owned by the American company MIPS Technologies…The Godson-2 is pretty much a copy of the MIPS R10000 which makes it on par with 1995 technology.’ The Chinese plan on using these chips in consumer electronics for the local market, but one can assume that they will eventually end up in exported electronic goods. I wonder if MIPS Technology will sit idly by when this happens?”


  • Posted by Guest

    oh hey 😀 – “Graphic: Vector vs. Scalar”

    also see

    and btw! china and the world economy, from T-shirts to T-bonds 😀 – “Beijing, not Washington, increasingly takes the decisions that affect workers, companies, financial markets and economies everywhere”


  • Posted by Movie Guy

    WTO site info:

    I believe it would help if WTO had shown both the domestic currency value and the U.S. dollar value for all figures. Expressed in values representing the years concerned.

    If done properly, the U.S. dollar conversion would represent the average value of the other currency for each of the months, rolled up to represent the yearly summary concerned. This assumes WTO was performing monthly conversions based on monthly data rollup.

    Presently, how do we know what currency conversion was used to present the U.S. dollar amounts?

    And if the tables were published with the domestic currency values and no conversion was performed, you would have to have a currency conversion table for the year concerned before your dollar figures would have real meaning. And you wouldn’t have the advantage of monthly currency changes being presently properly in the annual domestic currency presentation.

    Almost all multinational economic performance data measurements I have found involve currency conversions that have already been performed.

    Brad’s point raises a number of questions if taken in a broader context. When are the currency values of imports and exports data converted into the global reserve currency (USD) or whatever other currency is being used for a summary presentation?

    I assumed that such conversions took place monthly, as data is typically collected on that time period basis. I hope this is how the UN and the WTO are collecting their data, whether presented next month or three years from now.

  • Posted by Guest

    oh yeah and i am glory it just sez guest, but i am that too 😀

  • Posted by Guest

    hey so i just read that economist article, if i may annotate 😀 – “Richard Freeman, an economist at Harvard University, reckons that the entry into the world economy of China, India and the former Soviet Union has, in effect, doubled the global labour force.”

    “So, with twice as many workers and little change in the size of the global capital stock, the ratio of global capital to labour has fallen by almost half in a matter of years: probably the biggest such shift in history. And, since this ratio determines the relative returns to labour and capital, it goes a long way to explain recent trends in wages and profits.

    “In America, Europe and Japan, the pace of growth in real wages has been unusually weak in recent years…

    “The flip side is that profits are grabbing a bigger slice of the cake (see chart 4). Last year, America’s after-tax profits rose to their highest as a proportion of GDP for 75 years; the shares of profit in the euro area and Japan are also close to their highest for at least 25 years.” – “China’s main impact on the world economy is to change relative prices and incomes.”

    “Central bankers like to take all the credit for the defeat of inflation, but China has given them a big helping hand in recent years… A study by Dresdner Kleinwort Wasserstein reckons that China has knocked almost a full percentage-point off America’s inflation rate in recent years… As it is, China’s reduction of inflationary pressures has allowed central banks to hold interest rates lower than they otherwise would be…

    “In its latest annual report, the Bank for International Settlements (BIS) asks whether it is really desirable to maintain positive inflation rates when China is boosting the world’s productive potential so dramatically and thus reducing the prices of so many goods. In other words, are central banks targeting too high a rate of inflation now that China has joined the global market economy?” – “During the late 19th-century era of rapid globalisation, falling average prices were quite common.”

    “This ‘good deflation’, which was accompanied by robust growth, is very different to the bad deflation experienced in the 1930s depression. Today, we would again have had ‘good deflation’—but central banks have instead held interest rates low in order to meet their inflation targets. The BIS frets that this has encouraged excessive credit growth…

    “This echoes a fierce debate in the 1920s. At that time, a similar jump in the world’s productive potential (then caused by technology-driven productivity growth) was reducing manufacturing costs. Some economists suggested that, in such circumstances, overall price stability might be the wrong policy goal. Instead, they argued, average prices should be allowed to fall to pass the productivity gains on to workers and consumers as higher real incomes. But just like today, monetary policy prevented prices from falling. And an overly loose policy then inflated the late-1920s stockmarket bubble.” – “The Austrian school of economics offers perhaps the best framework to understand what is going on.”

    “The entry of China’s army of cheap labour into the global economy has increased the worldwide return on capital. That, in turn, should imply an increase in the equilibrium level of real interest rates. But, instead, central banks are holding real rates at historically low levels. The result is a misallocation of capital, most obviously displayed at present in the shape of excessive mortgage borrowing and housing investment. If this analysis is correct, central banks, not China, are to blame for the excesses, but China’s emergence is the root cause of the problem.”


  • Posted by Stormy

    I may be missing something here, but since we went off the gold standard, even the reserve currency is not a good measurement from year to year.

    If it inflates or deflates, then the next year’s measurement will be relatively distorted. The comparison of the two years may not be reflective of what happened.

    Rather, we have to pick the dollar’s value in a given year, and use that for a standard.

    Oil we know how to handle. Barrels.

    Everything else seems more like a seance than a science.

  • Posted by dry fly

    :::Everything else seems more like a seance than a science:::

    Well that’s probably why they call economics the ‘dismal seance’…

  • Posted by Guest

    you could use SDR units, like the economist does for commodities 😀

    like even the gold/oil ratio has varied a bunch over time, altho as i understand it the “oz. of gold = one fine suit” has stayed pretty stable!

    unless someone figures out how to translate the speed of light into units of currency, i don’t think there’s a universal constant you’ll find that is the same for all observers 😀


  • Posted by sun bin


    i agree, yes, oil in barrel. 🙂
    in fact, a basket of commodities, including steel, copper, palladium, corn, rice, etc. so as to replace the gold standard with something more useful.

  • Posted by Guest – During the course of the war, Keynes was at the Treasury and set himself to think about the post-war economic order. In 1938, he had warmed up to Benjamin Graham’s proposals for an international “commodity-reserve” currency to replace the Gold Standard. In 1943, Keynes forged his ideas for “Bancor”, a proposal for an international clearing union. In consultation with the Americans, Keynes eventually relented on his idea and accepted the American “White Plan” for an international equalization “fund” held in the currencies of the participating nations. [] – The Terra project is the launch of a commodity-backed Trade Reference Currency (TRC), a supra-national currency that works in parallel with national money systems. It is uniquely designed to provide a stable international mechanism for planning, contractual and payment purposes worldwide.

    It is intended to address three fundamental systemic problems of our current monetary system, namely:

    * The lack of an international standard of value.
    * The accentuation of boom and bust cycles stimulated by the conventional money creation process.
    * Institutional constraints in opposition to an international monetary reform.

    The TRC initiative will create a reference currency by standardizing countertrade. This currency would be fully backed by a dozen or so of the world’s most important commodities and services in the global market, thereby providing, for the first time since the gold-standard days, an international standard of value that are inflation-resistant, among several design features. []

  • Posted by Stormy


    Great twist!

    Guest (Glory?) and Guest (not Glory?)

    Thanks, I really appreciate the links and the comments. Both really helped me.


    Or something in a basket. Chuckle.

  • Posted by my