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Well said.
The problem with increasing internal spending is that Chinese people as a culture are used to saving. They save about half of their income, compared to about 10% for average families in the West. In that regard, China will always need export market to sustain its economy. The government is trying to promote more personal spending, but I don't find that a wise idea. Consumerism was part of the reason the West got into this mess.
 
I've already repeated post threads about the Economy in the Chinese Economy thread.
 
The problem with increasing internal spending is that Chinese people as a culture are used to saving. They save about half of their income, compared to about 10% for average families in the West. In that regard, China will always need export market to sustain its economy. The government is trying to promote more personal spending, but I don't find that a wise idea. Consumerism was part of the reason the West got into this mess.
But if internal consumption increases then there is no worry but the problem is there is still limit on internal one.....

Chinese companies have to export to get more customers in potential market as it is easy for them to access than competing in local market with other domestic companies. At the end profits is all that matters, whether you earn by export(easier than) or consumption by local people.
 
But if internal consumption increases then there is no worry but the problem is there is still limit on internal one.....

Chinese companies have to export to get more customers in potential market as it is easy for them to access than competing in local market with other domestic companies. At the end profits is all that matters, whether you earn by export(easier than) or consumption by local people.
The problem is that Chinese manufacturing has grown way bigger than what its internal demands can sustain. For example:

I produce 100 cars a year and sell them both in China and abroad. China's market only has room for 50 per year so I sell the other half around the world. Due to economic crisis, my oversea market has shrunk to only 25 cars per year, so my total maket has shrunk to 75 cars per year while my production capacity is still at 100. That means I have to downsize my operation in order to cope by laying off workers.

The problem is that once the workers are laid off, their buying power shrinks due to lack of income, thus shrinking the domestic market. Now I have to lay off even more due to reduced demands, creating a downward spiral.

That's the price to pay for being the world's factory.
 
The problem is that Chinese manufacturing has grown way bigger than what its internal demands can sustain. For example:

I produce 100 cars a year and sell them both in China and abroad. China's market only has room for 50 per year so I sell the other half around the world. Due to economic crisis, my oversea market has shrunk to only 25 cars per year, so my total maket has shrunk to 75 cars per year while my production capacity is still at 100. That means I have to downsize my operation in order to cope by laying off workers.

The problem is that once the workers are laid off, their buying power shrinks due to lack of income, thus shrinking the domestic market. Now I have to lay off even more due to reduced demands, creating a downward spiral.

That's the price to pay for being the world's factory.

That's a false fallacy because it's actually better that the workers are laid off, because it allows the resourceful workers to eventually find jobs that generate more value and benefit society as a whole even more. That's the idea of 'creative destruction'.

Sometimes failure is important to weed out those companies which are less competitive than others. That way, the resources are always allocated to the companies which are more efficiently allocating resources. If this process is not allowed to happen, then the whole economy gets dragged down. Eventually, the economy implodes on itself in a sea of non-competitiveness.


Just look at Greece.
 
(Reuters) - China's bid to energise a stuttering economy by cutting interest rates twice in a month and making it more attractive for banks to take risks on private sector borrowers is falling flat with the most country's most dynamic job generators -- smaller firms.

Twin moves to cut and deregulate interest rates have effectively chopped borrowing costs by up to 170 basis points, a potentially eye-popping squeeze on bank lending margins.

Still, that rate-reduction has not been nearly enough to tempt a dozen small factories and wholesalers around Beijing visited by Reuters in the wake of July's policy shift.

Red tape and tough collateral requirements mean business owners prefer to borrow from family and friends to expand in good times and, with the economy in its worst downtrend in three years, the inclination to take on bank debt is close to zero.

"Business this year has fallen by two-thirds compared to last year," said a bed linen seller surnamed He, who last took a bank loan in 2009 for 400,000 yuan ($63,500).

TEXT-MESSAGE PITCHES

Beijing's crackdown on home purchases, which has hurt his sales, have made it easier still to ignore regular text messages from banks to his mobile phone urging him to borrow.

There are pockets of bustle in a nearby wholesale consumer goods market, touted as the biggest of its kind in north China. But a silk-blouse seller named Zheng typifies a reluctance to borrow that troubles economists and policymakers alike -- complaining that bank debt is too hard to secure and unnecessary with business so slow.

China needs firms to spend to keep creating jobs and guard against the risk of growth falling below the government's 7.5 percent target this year. It came close in the second quarter, with the economy expanding just 7.6 percent on the same period in 2011.

With small- and medium-sized firms accounting for about 60 percent of China's economic output and 75 percent of its jobs, they are a huge potential spur to activity.

In China, the parameters of what constitutes a small or medium enterprise vary greatly, depending on the sector. They can have fewer than 10 employees or up to 2,000 staff, and their annual revenue can be as little as 500,000 yuan or 2,000 times more, at 1 billion yuan.

SMEs have not always shied away from banks. A year ago. they complained about a lack of financing, after a monetary policy tightening campaign resulted in banks channelling most lending to behemoth state firms, choking off funds to others.

Since November 2011, China has freed an estimated 1.2 trillion yuan for new lending by cutting 150 basis points from the proportion of deposits that banks must keep as reserves.

RELAPSE RISK

But if SMEs don't borrow, big state businesses may be forced to - a dangerous echo of the state-led binge of 2008-10 that left local governments with 10.7 trillion yuan of debt and banks nursing bad loans estimated at 2-3 trillion yuan.

Louis Kuijs, a project director at the Fung Global Institute in Hong Kong, says a relapse would risk state firms frittering loans away on wasteful investment, something the government says it wants to discourage and that its reforms aim to change.

Reforming SME credit is a key concern for the director-general of Asian Development Bank's East Asian Department, Robert Wihtol.

"It relates directly to the shift to a more consumer-driven, services driven economy," Wihtol told Reuters on a recent visit to Beijing. "This is a key issue that the government is going to have to address. Small and medium-sized enterprises do not have adequate access to the financing they need."

A toy seller, Zhu Ping, says it only makes sense to borrow from a bank if she wants at least one million yuan -- and she does not want that much.

'POINTLESS BORROWING'

"It's pointless borrowing several hundred thousand yuan from a bank," she said in her shop packed with toy cars, pink castles and plastic building blocks. "Just pick any family and it would have that money to lend."

Such unregulated lending drives a shadow banking system, worth an estimated 10 trillion yuan, that analysts say puts China's financial stability at risk.

In an industrial park in the southern part of Beijing, a finance manager at a high-speed train maker said low interest rates will not entice her firm to borrow more to expand, because it does not have land beyond what it has already pledged as collateral to banks. In China, land remains banks' preferred collateral.

"Lowering interest rates does not address the fundamental difficulties (for borrowers), such as stringent guarantee requirements that banks ask from small companies," the finance manager said. (Editing by Nick Edwards and Richard Borsuk)

China's rate cuts fall flat as small firms bypass banks | Reuters

this is why our economy is slowing, state-owned banks are not lending easily to small and medium sized enterprises(SME).
therefore the biggest growth engine and biggest job creator of the economy (SMEs) are not getting the funding to expand business or even move up the value added chain to stay competitive in the global slowdown.

as long as SMEs are not getting the funding, the chinese economy will continue to slow.

the state-owned banks are only lending easily to state-owned enterprises(SOE).

our capital markets are small and underdeveloped, so SME have no choice but to get funding from private investors also called shadow banking system, but they charge very very high interest rates.

the corporate bond and junk bond market must be reformed and developed rapidly so SME have a source of funding.

stock market is doing poorly and its diffcult to get listed and approval time takes an age.

private equity and venture capital go to only a very few select companies.


my solution would be to tell the SOEs to get funding from the bond market and let banks lend to SMEs with less strict requirements for loans like collateral needed.
the banking system and the overall financial system must be reformed so credit is going to the real economy and the private firms that innovate, produce, create jobs and add to GDP.

until this funding problem is solved, things are not going to get better.
 
this is why our economy is slowing, state-owned banks are not lending easily to small and medium sized enterprises(SME).
therefore the biggest growth engine and biggest job creator of the economy (SMEs) are not getting the funding to expand business or even move up the value added chain to stay competitive in the global slowdown.

as long as SMEs are not getting the funding, the chinese economy will continue to slow.

the state-owned banks are only lending easily to state-owned enterprises(SOE).

our capital markets are small and underdeveloped, so SME have no choice but to get funding from private investors also called shadow banking system, but they charge very very high interest rates.

the corporate bond and junk bond market must be reformed and developed rapidly so SME have a source of funding.

stock market is doing poorly and its diffcult to get listed and approval time takes an age.

private equity and venture capital go to only a very few select companies.


my solution would be to tell the SOEs to get funding from the bond market and let banks lend to SMEs with less strict requirements for loans like collateral needed.
the banking system and the overall financial system must be reformed so credit is going to the real economy and the private firms that innovate, produce, create jobs and add to GDP.

until this funding problem is solved, things are not going to get better.

It's a bit more complicated than that. Think of it this way:

The role of the central bank is to adjust money supply. You need to supply enough money to 'Good' companies so that they survive in rough times, but you also need to restrict money supply to those 'Bad' companies that just waste resources.

'Good' companies are those that just need a temporary cash infusion, and are efficient and competitive enough to survive on their own. 'Bad' Companies are those that cannot survive without infusions of cash and favors.

So a good interest rate policy is one that maximizes both 'Good' company survival and 'Bad' company readjustments. You want the interest rate low enough that the good crops survive, but you want it high enough that the bad crops don't.
 
this is why our economy is slowing, state-owned banks are not lending easily to small and medium sized enterprises(SME).
therefore the biggest growth engine and biggest job creator of the economy (SMEs) are not getting the funding to expand business or even move up the value added chain to stay competitive in the global slowdown.

as long as SMEs are not getting the funding, the chinese economy will continue to slow.

the state-owned banks are only lending easily to state-owned enterprises(SOE).

our capital markets are small and underdeveloped, so SME have no choice but to get funding from private investors also called shadow banking system, but they charge very very high interest rates.

the corporate bond and junk bond market must be reformed and developed rapidly so SME have a source of funding.

stock market is doing poorly and its diffcult to get listed and approval time takes an age.

private equity and venture capital go to only a very few select companies.


my solution would be to tell the SOEs to get funding from the bond market and let banks lend to SMEs with less strict requirements for loans like collateral needed.
the banking system and the overall financial system must be reformed so credit is going to the real economy and the private firms that innovate, produce, create jobs and add to GDP.

until this funding problem is solved, things are not going to get better.
There is a lack of competition in the banking sector as it is dominated by the big four banks ICBC BOC ABC and CCB. Smaller and more dynamic competitors like CMB need to step up and create more competition. Market entry is very difficult because banks have high reserve ratios and need to take in a lot of deposits to have funds to loan. The government cannot issue too many licenses either otherwise unscrupulous bankers will waste depositor's money and then go bankrupt.
 
monopoly prevent competition. when an industry is highly dominated by one or small group of companies, that may create monopoly. In search world, Google dominate searching traffics. In rare earth production, China dominated 97% of world export. they did not monopoly. Chinese rare earth materials where sold at dirt prices with profit margin 5% or less. Chinese sold gold for trash prices.

then is there a lack of competition in the Chinese banking sector? questions
1) which large bank dominate the Chinese banking service?
2) how big is the biggest bank in Chinese banking market shares?
3) how high is its profit margin compare with other rivals?

open this link, go page 88.
http://www.brandfinance.com/images/upload/best_global_banking_brands_2012_dp.pdf

China has 12 big banks in the top 100 list. I dont see one is much bigger than others. They are all very big, there are 500 more big banks over there and the industry is free to enter. is there really "lack of competition"?

Well, I dont see that is a case. if you see, please tell me how and prove with data.
 
The problem is that Chinese manufacturing has grown way bigger than what its internal demands can sustain. For example:

I produce 100 cars a year and sell them both in China and abroad. China's market only has room for 50 per year so I sell the other half around the world. Due to economic crisis, my oversea market has shrunk to only 25 cars per year, so my total maket has shrunk to 75 cars per year while my production capacity is still at 100. That means I have to downsize my operation in order to cope by laying off workers.

The problem is that once the workers are laid off, their buying power shrinks due to lack of income, thus shrinking the domestic market. Now I have to lay off even more due to reduced demands, creating a downward spiral.

That's the price to pay for being the world's factory.


you may live in India or setup a plant in India.
Chinese welcome competitions, If you sell less and less means you are out of the game. it is not price of the world factory or price of the export economic mode. you can search for Chinese export data. in the last 10 years, Chinese export grows statically, one year may have some noise in the growth graph, but the trend did not change. over capacity is everywhere you can not escape from it. assume you are not factory, you open a fast restaurant, do you want to cook and sell what your family can eat? you must stay in profit, you sell more. more customers comes, you prepare more,,,, always have more than you can sell. that is over capacity.

even you live in India, India imports a lots more than export. Do you think over capacity does not exist in India? they do have more this problem. out of competition force them to quit, close and layoff. Bankruptcy is over capacity worse to a point where it crack the bottom line you can support it.


China is the most competitive country on earth. yes, a lot of companies move out since labor costs jumps 20% a year. why? are Chinese out of competition? I think in this way. last year and this year, more Chinese were born than they die, the population grows, those companies pay 15% more but nobody work for them. Chinese can find jobs with 20% or 25% higher pay why work for less? so, the losers out of China. it is not Chinese. Chinese still have and can finds better jobs. they are not jobless or die out.

20 years or 30 years ago, Chinese worked hard for food and basic needs. today, they have money, want to buy more services. services provide more jobs and better pays than factories.
 
Research team unveils air substance density device - Taipei Times

"Research team unveils air substance density device
By Lee I-chia / Staff reporter
Thu, Jul 19, 2012

BDFef.jpg

National Taiwan Normal University chemistry professor Lin Cheng-huang yesterday holds devices he and his students invented that uses a new quantitative detection technique to determine the density of various substances in the air. Jul 19, 2012 (Photo: Tang Chia-ling, Taipei Times)

A research team from National Taiwan Normal University (NTNU) yesterday unveiled a quantitative detection technique that can instantly determine the density of various substances in the air by analyzing the changes in frequency when air is blown through a tiny whistle.

Lin Cheng-huang (林震煌), a professor at the university’s department of chemistry, said that with the new detection method invented by his research team, rapid screening for diabetes by measuring acetone levels in breath could become possible in the near future.

The research project, funded by the National Science Council, is the first in the world to use the analysis of sound frequency to determine gas composition and its density
, Lin said, adding that the new technique obviates the need for a calibration curve to determine the quantity of substances, as is used in the most common techniques currently available.

Compared with current common techniques for gas detection through chemical principles, the new technique’s detection -principle comes from physics — by applying a specially designed whistle after the process of gas chromatography (separation of the different components in the gas) and analyzing the various sound frequencies created as the substances are blown through the whistle, Lin said.

Lin said the team was cooperating with other research teams, especially on the development of a household medical device to detect acetone levels in a person’s breath — which is likely to be a fast screening method for diabetic ketoacidosis.

Most people dislike intrusive methods such as blood tests, so if the device proved effective in further experiments, it could potentially reduce the need for such tests, Lin said.

By blowing air into the device and waiting for a few minutes for the analysis, users can easily detect acetone levels in their breath, he said.

Lin added that the team hopes to make the device easy to operate and available in the handy size of an iPad, so that it can be used for daily health monitoring."
 
:cheers: :cheers: :cheers: :cheers: :cheers: :cheers:

Yuan on track to become Asia 'anchor' currency: ADB

SINGAPORE: China's yuan is increasingly being used to settle trade transactions in Asia, gradually cementing its way to becoming a regional 'anchor' currency, the Asian Development Bank (ADB) said Thursday.

The rise of the currency's use in trade and in the financial markets is likely to nudge China to further open up its financial sector if it wants the yuan to play a bigger global role, the Manila-based lender said.

The yuan, or renminbi, "is being increasingly used to settle trade transactions", the ADB said in a statement issued in Singapore at the launch of its latest report, the Asian Economic Integration Monitor.

"Over time it could become an anchor currency, helping the region to integrate their economies, cooperate on monetary and finance issues as well as gradually open up the (Chinese) financial market," the statement said.

Iwan Azis, head of ADB's Office of Regional Economic Integration, told reporters at the launch that some countries engaging in bilateral trade with China settle in renminbi, and their number has been increasing.

"I know that policymakers in Beijing are actively persuading ASEAN countries to use yuan for their bilateral trade settlement with China," he said, referring to the 10-member Association of Southeast Asian Nations.

Hong Kong, Singapore and London settle some international trade in yuan, and this month the Singapore Exchange said it is ready to quote, trade, clear and settle securities denominated in yuan, the ADB report said.

"All in all, it makes sense that some of the players -- exporters and importers -- start to accept the use of alternative currency, and since China is the biggest player in the field, they accept the use of the yuan for trade settlement," Azis said.

He said it is "only a matter of time" before the yuan becomes an anchor currency, given that China is now the world's second biggest economy.

Since late 2008 China has established 20 bilateral local currency swap arrangements with countries within and outside Asia, totalling 1.6 trillion yuan ($157 billion), ADB said.

In the first quarter of this year, current account transactions settled in yuan were 8.6 percent of China's total current account deals, well above the 5.7 percent in the same quarter last year, it added.

"This is a very big step forward. Definitely, they are pushing the renminbi toward internationalisation," ADB economist Lei Lei Song said in Singapore.

He said, however, that becoming an anchor currency does not automatically mean the yuan will become part of the forex reserves of Asian countries, most of which hold the US dollar, euro and the Japanese yen.

Being an anchor currency means that regional countries that use the yuan to settle their trade with China will manage their currencies depending on the yuan's movements.

The yuan can become a reserve currency if China opens up its financial markets and allows other countries to buy and hold yuan assets, said Song.

Malaysia's central bank is allowed to buy yuan bonds, he said, adding that China, Japan and South Korea had agreed to purchase each other's government bonds, while the yen and the yuan can be traded in each of the countries' financial markets.

"Everything is moving in a managed away," Song added.

Yuan on track to become Asia 'anchor' currency: ADB - The Economic Times
 
This is what you end up getting after investing heavily in R&D. Hope India follow it. Buy less weapon, transfer funds to research.
 
invested heavily in R&D is to develop high end technology. without soil the tech will die quickly. Russia is an example. they had invested(or over invested) in military, space tech. with small market and little industry supporting, tech dies faster than those old developers.

India can invest more in R&D, increase from 1% GDP to 2.5%, China spends around 2% GDP on R&D. but first, you need to have good infrastructure, then build up industry. where do you get the money from? it requires trillions USD. assume India found a big diamond stone in back yard one day have initial capital for good infrastructure. you still need to walk up from low tech to mid tech, to high tech. you face Chinese competition. Currently Chinese are selling most products at 30% cheaper than Indians can produce, that means Indian need to lose $30 billion on every $100 billion sales, are you ready to join the game?

Chinese did the same way to wipe out Japan, sKorea, Taiwan, Brazil, Mexico from horizontal, Can India push Chinese out of market? the price is very expensive.
 
China’s first shield spindle bearings trial in Shanghai
China’s first shield spindle bearings trial in Shanghai | China's Great Science and Technology
lyc-bearing-300x451.jpg



2012-07-19 — June 15, with the shield machine equipped with Chinese LYC corporation’s Shield spindle bearings, Shanghai 10th subway line’s tunnel penetrating Yili Road was finished. The era of domestic shield machine without using China-made main bearing has been ended. It indicates that China has had the alternative bearing products to abroad bearings. The world shield machine bearing market dominated by foreign providers has been changed.

Spindle bearings of the shield is the core component of the shield machine as affected by the use of working conditions, the strict requirements of its core technologies mastered by only a small number of well-known international enterprises bearing on the accuracy of product and reliability of operation, and to monopolize the world shield machine bearing market. To break the monopoly of foreign countries will shield the development of the spindle bearings included in the National 863 Program, and to the company developed. To this end, the company as the primary research unit led the formation of a strong R & D team to carry forward the pioneering spirit, and give full play to the enterprise several decades in the accumulation of material application, product design, manufacturing, testing, experiments, strong R & D advantage, The innovative design and application of the capture of more than 10 key technical problems, a number of breakthrough in core technology, and national patents, proprietary technology, 6, finally after three years of research, the successful completion of state regulations task.

Subsequently, in order to break the foreign monopoly, started the national industry brand, the strong support of a well-known companies boldly LYC bearings installed in the downtown sections of the construction of the shield machine. As a result of the domestic bearings in the downtown area for the first time installation use, if there is traffic of the region of the accident will be fully interrupt, it will not only affect the region’s traffic order, and LYC brand image will also be a huge impact. To this end, LYC company sent a technical team, headed by the chief engineer on-site tracking service.

June 1, reporters in Shanghai, the most prosperous sections of Yili Lu subway line at the entrance to see the construction is responsible for the excavation of the subway entrance, in accordance with the engineering design, the shield be through a trunk road below. According to the person in charge of the construction side of the road at the excavation work of the successful completion of the main bearings of the shield machine tunneling works, stable torque evenly, fully capable to shield mechanical requirements on the main bearing, eventually, after nearly 20 day, day and night construction, that section of the road projects successfully completed on June 15. At the same time, according to the company’s project arrangement, the bearings will continue in other subway project application. At this point, LYC bearings again to the absolute power to prove its good quality and brand value, which laid the foundation level of manufacturing R & D in such product areas, continue to maintain a leading position in the country.

LYC Bearing Corporation was established in 1954. The technical expertise has evolved into engaging 2500 plus engineering personnel and 9500 manufacturing associates. The product range is divided into nine individual categories with more than 10000 different variants the bearings range extends from IDs of 8mm up to a maximum OD of 6.7 metres. As a world class bearing manufacturer LYC takes pride in their quality and maintains their quality assurance certifications namely ISO 9001 ISO 9002 ISO 14000 QS9000 and VDA 6.1.

LYC currently produce a number of bearing classes including the P2 class in the size range of up to an OD of 6.25 meters. These larger size bearings can weigh up to 22 metric tons.Some of these bearings can consist of as many as 2386 individual components. Split bearings are available in sizes of up to 1.2 metres (ID) with the larger spherical bearings being available in sizes up to 1.6 metres (OD).LYC’s mission has been and continues to be to provide its customers with fully integrated solutions these include Design & Development Manufacturing Testing & Evaluation and an After Market Service that is second to none.

The “New LYC Project” invests US $370 million with landing for contribution 667 ,000 sq meters (Luolong Technology Park). The first stage invests US $167 million with landing for contribution 218 ,776 sq meters which includes four programs: wind turbine bearing precision bearing automobile bearing and technology center program. After establishing LYC would have the top-class centers in production R&D inspection and test. This first stage project will be completed before the end of 2010 .

LYC Import & Export Corporation is LYC’s foreign trade division managing all aspects of import and export for international trade. This division also maintains an overseas trading branch in the United States. “LYC” brand products have been marketed to over 70 countries and regions in North America South America Europe Oceania Asia and Africa. The annual export revenue generated by this division continues expanding to over 20 million US dollars.
 
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