One world, many realities

As we digest trillion dollar deficits, bailouts, bankruptcies, record unemployment and a 15- to 20-percent reduction in our average personal net worth, the Chinese are in a different universe.

To give you a sense, here are several of the major business stories of the last week, with some added comments and explanations. Keep in mind that most of these posts are from government sources such as Xinhua and Beijing Review.

Used FDI down 20.4 percent in first five months.

In May 2009 Foreign Direct Investment (FDI) declined 17.8 percent, the eighth straight month of declines in a row, but it also showed that the decline is slowing. China continues to lead the world in terms of attracting FDI.

China’s fiscal revenue up 4.8 percent in May.

China’s fiscal revenue rose 4.8 percent year on the year to $96.05 billion in U.S. dollars in May. Contrasted with the first five months of this year, when revenues fell 6.7 percent.

Eyes on BRIC summit for policy shifts on U.S. dollar.

Brazil, Russia, India and China will be holding their first full-fledged economic summit amid Russian calls for a new reserve currency to compete with or replace the U.S. dollar. Be prepared. These are the first in a series of attacks on the dollar which could further erode our world economic position.

World economists prudent on China’s economic recovery.

China’s exports and imports shrank for the seventh month in a row in May, with exports falling 26.4 percent from the same period a year ago and imports down 25.2 percent, according to the General Administration of Customs (GAC). The biggest challenge facing China’s economy is the need to expand domestic demand, to offset the continuous slumping exports.

Subsidies boost rural China home appliance sales 42 percent in May.

Due to a 10-percent government rebate, home appliance sales rose 42 percent from April. The program is part of the government’s efforts to jumpstart consumer sales. It is unclear what the long term effects of these short term economic stimulus efforts will be.

China stockpiles frozen pork to stabilize prices, protect breeders.

China is moving aggressively to prevent the effects of the H1N1 flue virus from causing a major long term disruption in the pork market.

Equity ratio policy spurs concerns.

China, in its efforts to spur the economy, is lessening the capital requirements for projects. The policy is having effects on bank lending practices and could create bad debt issues down the road if real estate and consumer demand soften. This damn the torpedoes, full steam ahead approach is emblematic of the government’s current economic approach. It is not dissimilar from policies we pursued not too long ago.

Why BMW procurement sets tongues wagging.

The Chinese government has added BMW as a source for official government cars, much to the disapproval of the public, which is being vocally aired in all of the media.

China’s retail sales up 15.2 percent in May.

Growth in China’s retail sales, a key gauge of consumer spending, picked up speed in May as the country kept boosting domestic spending to stimulate economic growth, the government said in Beijing.

Beijing, Shanghai featured in the top 30 most costly cities.

Slowing inflation, the effect of the recession in the west and strengthening currencies have pushed up the cost of living for international staff and visitors in Asia. A survey conducted by human resources consultant ECA International has ranked Beijing, Shanghai, Hong Kong, Shenzhen and Guangzhou among the 10 most expensive cities in Asia and top 30 worldwide.

Job market predicted to touch new low.

According to a quarterly survey released by Milwaukee-based Manpower Inc., employment on China’s mainland for the third quarter will cool to a five-quarter low due to the impact of the global economic downturn. Thanks to the government’s fiscal stimulus package, things are looking better. Companies in the steel, automobile, finance and transport industries were likely to hire more employees in the coming months, in response to industry adjustments and revitalization plans issued by the State Council, the report said.

China’s CPI falls 1.4 percent in May, indicating continuing recovery.

Inflation is not a current concern as the consumer price Index (CPI) dropped for a fourth straight month, although at a slower rate than the previous month.

China relaxes control on foreign exchange use.

In an effort to encourage overseas acquisitions by Chinese companies, the government has relaxed the amounts, rules and procedures for use of foreign exchange which means that Chinese companies who have been paid in U.S. dollars have more buying power and options in pursuing acquisitions.

If you compare these headlines with the ones you read everyday in America, you will notice stark differences in subject, outlook and tone. It is interesting to note that China is using some of the policies which contributed to our problems, including cheap credit, relaxed equity requirements, inflated real estate prices and aggressive acquisitions. Time will tell if they are able to handle them better than we did.