Comments on: Roach on globalization and China

By: Anonymous

Anonymous — Sun, 04 Feb 2007 17:22:32 +0000

China slows down investment in steel industry. Investment on fixed assets in China’s iron and steel sector reached 260.3 billion yuan (about 33 billion U.S. dollars) last year, which Luo Bingsheng, vice-chairman of the industry’s association, termed excessive.
But he noted growth of the investment has slowed down significantly to 0.81 percent year-on-year last year, 23.69 percentage points lower than the growth of the national total investment on fixed assets. Luo warned iron and steel enterprises that the country’s production capacity has outstripped market demand.
Luo said the emphasis of investment has shifted to high-end projects to produce more value-added products.
China produced 418.78 million tons of crude steel last year, a rise of 18.48 percent year-on-year, and its output of pig iron was 404.17 million tons, up 19.78 percent year-on-year.
China’s apparent consumption of crude steel amounted to 384.05 million tons last year, accounting for 30.98 percent of the global total.
Domestically-made steel products accounted for a record 95.82 percent of China’s steel market last year, 2.61 percentage points higher than the previous year.
China became the world’s largest stainless steel producer last year with an output of 5.3 million tons, up 67.68 percent year-on-year. Source: http://www.researchinchina.com

By: STS

STS — Fri, 02 Feb 2007 09:24:59 +0000

Joseph:

Perceptive as usual — one quibble however about the notion of locating quant finance experts in NYC. The software industry has a long history of importing talent from India and China in just the way you described. It was more cost effective to bring them here than to operate trans-nationally.

This has all completely changed since 9/11 however. Immigration restrictions seem to have been the spark that kicked off a hiring race among multinational software/services players in India particularly. Once the artificial barrier was gone, and CEO’s started to panic that the other players might beat them to the local talent, the perceived value of keeping staff in one place vanished almost overnight.

The same will happen in finance to some degree, although the differences in business model (proprietary algorithms and tools serving trading vs. licensing of software to customers) may affect the final distribution of the workforce. It will probably be more peaked near exchanges for real-time front office/quant collaboration.

I’m skeptical about the “decade or two” timeframe you gave for Shanghai’s full emergence. It could be sooner.

By: bsetser

bsetser — Fri, 02 Feb 2007 05:17:26 +0000

Ponzi — try http://www.bea.gov — it is the US government’s web site for economic data.

By: Ponzi Q. Globalization

Ponzi Q. Globalization — Fri, 02 Feb 2007 03:01:56 +0000

It’s actually much easier to centralize the programmers and physics Ph.D.’s in New York City, than it is to outsource the jobs to China, because NYC has the specialized technical knowledge that Shanghai doesn’t quite have yet, and won’t for a decade or two.

I don’t buy this. A city doesn’t have knowledge. The people in a city do. The knowledge moves with the people. Look at the centers of physics pre and post WWII. The people make the center, not vice-versa. Technology and the current neoliberal regime make the transferring much easier than in the past.

What should be asked is (1) Where would it be cheaper to do the work, Shanghai or NYC? and (2) Why would the leaders of China not want to have this type of work done domestically?

This globalization nonsense will create a single global labor pool. And, while realizing that it may not be a zero-sum game, I’d bet that for most work, the wages in this single global labor pool will be less than the wages that are currently enjoyed by Americans.

By: Guest

Guest — Fri, 02 Feb 2007 02:35:35 +0000

“There can be no mistaking the intensity of the angst bearing down on the American workforce.”

For the past six years, US Government’s trade, currency, and monetary policy has been implemented in support of the trans-national agenda to establish the “platform” corporate structure. Manufacturing and production of low cost products in low wage countries for sale at “high” relative prices in the developed world.

Roach was one of the first to signal the dangers of this unsustainable “imbalance”. I am surprised by his current myopia as the electorate begins to realize what the powers to be have been about. Protectionism is in the eye of the beholder. From my perspective the protectionists are those, like the transformed Mr. Roach, who seek to sustain the status quo of foreign and domestic government manipulation of the credit and currency markets.

It is time for the Asian world (Japan included) to stop competitive currency devaluation, remove impediments to US exports, and stimulate domestic (Asian) consumption demand.

The congressional elections were about unease with the US government complicity in support of the corporate agenda. Unfortuneately, it would appear the eviro extremists from the left have claimed victory and are replacing the fascist right.

By: Joseph Wang

Joseph Wang — Thu, 01 Feb 2007 22:25:47 +0000

bsetser: It helps US capital, but not US labor — not even high end labor. Goldman doesn’t have an office in NYC doing credit analysis for ICBC, the BAnk of America doesn’t have an office in N. caroline for the Bank of china (hope I matching US institution to Chinese bank correctly). And so on. Domestic Chinese financial intermediation is done with Chinese labor.

The gates haven’t opened up yet, but then they do (and we are talking about one or two years), there will be a lot of demand for computer programmers and physics Ph.D.’s to handle the flood of capital from China. It’s actually much easier to centralize the programmers and physics Ph.D.’s in New York City, than it is to outsource the jobs to China, because NYC has the specialized technical knowledge that Shanghai doesn’t quite have yet, and won’t for a decade or two.

These jobs are very, very high end, and ironically a lot of them seem to be filled by Chinese that have immigrated to the United States. It’s actually easier to move people to NYC than move the job overseas.

By: Ponzi Q. Globalization

Ponzi Q. Globalization — Thu, 01 Feb 2007 15:38:28 +0000

Ponzi — the easy answer is to look at the investment data (US domestic investment) in the GDP data (national income and products data). the level of business investment…

Thanks for the info. Is there a link to this?

By: HZ

HZ — Thu, 01 Feb 2007 08:26:58 +0000

I would argue that one shouldn’t judge the fairness of the economic system by the distribution of the financial wealth. Our political power is concentrated in the president/governors/congressmen/judges. That doesn’t inherently make the political system unfair, does it?
I think the right metric is to see how consumption is distributed. If it is distributed unfairly then the part that is deemed unfair should be taxed. For all the hand-wringing about mortgage interest deduction on housing affordability, a more effective way is to simply tax more the second homes, the trophy estates. Tax anti-social consumptions to make the society more fair, not capital accumulations.

By: Ponzi Q. Globalization

Ponzi Q. Globalization — Thu, 01 Feb 2007 07:17:42 +0000

Sort of like American workers that find with each passing day they have less use for American made products.

Yes, one follows from the other.

By: bsetser

bsetser — Thu, 01 Feb 2007 07:12:28 +0000

MTC — Dr. Jen only consistently beat me as a currency forecaster in 05 — his 06 call was the year of the yuan. didn’t happen. it was the year of the euro. i didn’t think the euro’s 05 fall would be sustained, he did. and i think we both underestimated yen weakness. right now, we basically have the same near term view of the yuan .. he is just not structurally bearish and i am (for the reasons you mention).

yes it is both globalization and currency policies that are shaking up the world. but remember, from say 92-97 there was very, very strong growth in both us exports and us imports and a lot of globalization (mexico’s integration into the us market, the asian tigers, the beginnings of china as an export force). but that era of globalization was marked by a stable us current accout deficit and the downhill flow of capital — japan basically financed SE asia, and US/ europe helped finance deficits in Latam. it differed markedly from the post 02 bout of globalization …