Qingdao, China: Golden City
(By Steven in Qingdao Life)
Let's put my posts into the proper context of China's economic miracle. These are my top ten reasons that China's economy will continue to boom at 8 to 10% a year for the foreseeable future.
1. In the last five years, China has signed free-trade-agreements (i.e. FTAs) with ASEAN, Pakistan, Chile, New Zealand, Singapore, Peru, Costa Rica, and Taiwan (e.g. technically ECFA). China is currently negotiating FTAs with the Gulf Cooperation Council, Australia, Iceland, Norway, and Southern African Customs Union. China has joint feasibility studies for a FTA under way with India, Korea, Japan, and Switzerland. See
China FTA Network
FTAs are important because they lower tariffs (e.g. lower cost for importers), increase imports and exports (which generates more jobs), and increase customs revenue.
2. The posts regarding Ford's $500 million engine plant or AU Optronics $3 billion LCD investment show the importance of foreign direct investment (i.e. FDI) in bringing new technologies, creating new jobs, and/or generating more tax revenue for China.
3. China has tacitly permitted workers to engage in strikes. Within the last six months, Foxconn has doubled the wages paid to its employees. In my view, wealthy foreign companies in China should have paid a living wage (i.e. sufficient to cover rent, utilities, food, transportation, health insurance, reasonable entertainment, cell phone service, internet connection, etc.) much earlier.
With greater disposable income, Chinese consumers will increase their consumption and help boost China's domestic economy.
4. China's $585 billion stimulus program is providing the funds to build new high-speed railways, highways, airports, dams, bridges, ports, 45% efficient super-ultracritical coal-fired power plants, wind farms, etc. China's stimulus creates jobs and the new infrastructure lays the foundation for a more efficient economy with reduced transportation and energy costs.
5. China's passenger rail traffic is being moved onto the expanding high-speed rail network. This allows the existing rail system to be used exclusively for freight cargo transportation. This reduces the constraints and bottleneck for an efficient freight transportation system. The practical effect is lower shipping costs.
6. As the world's largest exporter of machinery and electronics, China has attained tremendous economies of scale. Basic economics state that the distribution of a fixed cost (e.g. rent, employee wages, utilities, insurance, capital investment, etc.) over a higher volume of products will result in a lower marginal cost per additional item. Though the variable cost will increase slightly, the additional increase in material cost is usually minor.
7. China's manufacture of complex offshore oil platforms, liquefied natural gas carriers, and 300,000 ton oil supertankers demonstrates the increasingly sophisticated and high-value-added nature of China's exports.
8. China is fortunate to modernize now and employ the latest technologies. For example, LCDs (i.e. liquid crystal displays) are significantly thinner and lighter than CRT (i.e. cathode ray tube) television sets. LCDs require less energy and material to fabricate. Also, LCDs consume less energy to operate.
Another example is mobile phones. China avoided the need to build a time-consuming and cumbersome copper-wire landline phone system to connect every home and business. Instead, China leapfrogged to mobile phones that require only a few base stations.
The continuous use of new technologies has resulted in significant savings of national resources and energy efficiency.
9. China spent $15 billion on a program to induce consumers to buy new cars, which are more fuel-efficient and less polluting. A similar program was enacted to help consumers buy new and more energy-efficient appliances (e.g. refrigerators, washing machines, and air conditioners). Greater energy efficiency lowers fuel cost and increases disposable income. See
Domestic Demand to Drive China White Goods Market in 2010
10. China's expanding pursuit of clean energy (e.g. wind turbines, solar, geothermal, bio-fuel, and nuclear) will reduce the external cost of pollution and gradually result in cleaner air and water. This will reduce the health care cost and improve the quality of life for a healthier population.
In my view, the most important development is China's fourth-generation fast-breeder nuclear reactor. There are five major implications:
a) The fast-breeder reactor will help China achieve energy independence. The fast-breeder is 60% efficient in utilizing uranium fuel. Current nuclear reactors are only 1% efficient. A ten-year supply of nuclear fuel today can power fast-breeder reactors for 600 years.
b) The 60% efficient fast-breeder will eliminate nuclear fuel scarcity. Instead, there will be plenty of nuclear fuel for everyone. This will result in a dramatic drop in the cost of nuclear fuel.
c) Since a fast-breeder is 60% efficient, there is less nuclear waste. In fact, current nuclear waste may be reprocessed and burned in a fast-breeder to generate electricity.
d) A fast-breeder can also use thorium as fuel. Conventional reactors can only use uranium.
e) There is no theoretical impediment to a fast-breeder reactor. China already has a functional CEFR (i.e. China Experimental Fast Reactor). The obstacles lie purely in the engineering. China must solve the problems of scaling up the CEFR to commercial levels (e.g. 1 GW) of energy output.
If China can solve the engineering and safety problems then energy independence is within China's reach.
Qingdao, China: Golden City | Qingdao China | QINGDAO(nese)
"Enjoy these photos of a metropolis on the move, the
Sailing City going forward full speed ahead."
"Qingdao is one of the most important success stories of China’s economic miracle. This ever-growing city is home to one of the top ports in the country, two of China’s largest appliance makers (Haier and Hisense), the most recognizable consumer brand in China (Tsingtao Beer), a massive oil refinery project and strategic oil base in the Huangdao Development Zone, highly successful exporters, manufacturers, importers, and a large number of thriving multinational corporations either producing or operating offices here (such as Durex, Ikea, Nike, Lucent, Nestle, Stihl and many more). It’s no wonder the World Bank has honored Qingdao as one of China’s six “Golden cities”. The US Commercial Service agency had these good things to say about doing business in Qingdao:
Located on the southern tip of the Shandong Peninsula, Qingdao is one of eastern China’s major economic centers. Nestled between mountains and ocean, Qingdao’s unique cityscape is studded with lovely beaches, classic European architecture and ample green landscape. The city is well known for its historic and scenic tourist attractions, as well as being one of the best places in China to live and do business.
The World Bank honored Qingdao as one of China’s six “Golden cities” (a measure of investment climate, harmoniousness, governance and other measures). In recent years, the city has attracted billions in foreign direct investment and engages in trade with virtually every country on the planet. Among the city’s 17,854 foreign investment projects, 76 Fortune 500 companies have established projects in Qingdao."
