China Facts

Andrew Roth

Now that the Summer Olympics have started, here's some information I gathered about China.

Here's a CIA summary of China's economy:

China's economy during the last quarter century has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment.

China has generally implemented reforms in a gradualist or piecemeal fashion, including the sale of minority shares in four of China's largest state banks to foreign investors and refinements in foreign exchange and bond markets in 2005. After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. Cumulative appreciation of the renminbi against the US dollar since the end of the dollar peg reached 15% in January 2008. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2007 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income. Annual inflows of foreign direct investment in 2007 rose to $75 billion. By the end of 2007, more than 5,000 domestic Chinese enterprises had established direct investments in 172 countries and regions around the world.

The Chinese government faces several economic development challenges: (a) to sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) to reduce corruption and other economic crimes; and (c) to contain environmental damage and social strife related to the economy's rapid transformation. Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers have relocated to urban areas to find work. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world.

Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north - is another long-term problem. China continues to lose arable land because of erosion and economic development. In 2007 China intensified government efforts to improve environmental conditions, tying the evaluation of local officials to environmental targets, publishing a national climate change policy, and establishing a high level leading group on climate change, headed by Premier WEN Jiabao.

The Chinese government seeks to add energy production capacity from sources other than coal and oil as its double-digit economic growth increases demand. Chinese energy officials in 2007 agreed to purchase five third generation nuclear reactors from Western companies. More power generating capacity came on line in 2006 as large scale investments - including the Three Gorges Dam across the Yangtze River - were completed.

Regarding free trade, U.S. exports to China have increased a whopping 301% (PDF) from 2000-2007. Exports to other countries over that same time period were only 44%. The United States is China's top global trading partner with $302 billion in volume last year compared $236 billion with China's second trade partner, Japan.

YEAR	U.S. EXPORTS to CHINA ($bil)
2007	65.2
2006	55.2
2005	41.8
2004	34.7
2003	28.4
2002	22.1
2001	19.2
2000	16.3

Finally, here are the China-related blogs that I check up on every morning:

ART LAFFER AND OBAMA'S PLAN

ART LAFFER AND TAXES

Trade Freely and Expand

By GEORGE ALOGOSKOUFIS
FROM TODAY'S WALL STREET JOURNAL EUROPE
August 8, 2008

ATHENS

In periods of world-wide economic turmoil and international uncertainties, it is only natural that people will display increased anxiety about the future. However, Europe has successfully overcome even bigger challenges in the past and has the ability to do it again. A union that emerged from the ruins of a divided continent to create one of the world's largest areas of freedom and prosperity is strong and adaptable enough to cope with the challenges we face -- provided we can summon the leadership, vision and resolve required.

The pause for reflection following Ireland's rejection of the Lisbon Treaty must not be allowed to turn into a prolonged period of inertia. Inevitably, the increasing uncertainty about the treaty raises questions about the prospects for further enlargement. The resolution of this issue should demonstrate the EU's continued potential as an agent for change and progress across the continent. It is important to recognize that the desire of more countries to join the EU remains one of the most dramatic examples of the union's success.

We must therefore ensure that the most recent round of enlargement does not become the last. Until the status of the Lisbon Treaty is resolved, the EU should aim to sustain momentum by advancing forms of deep integration that bring aspirant countries as close as possible to the point of membership. That should include large countries like Turkey, as well as smaller nations in East and Southeast Europe.

The second major challenge is to restore confidence in our economic prospects. After a long period of rapid and sustained expansion, it is clear that the global economy is now entering a much more difficult and uncertain period. Current forecasts do not justify talk of a global recession. But a number of European countries, along with the United States, are likely to experience a significant contraction of growth in the immediate future as accumulated international macroeconomic imbalances unwind and economies adjust to cope with the effects of weakened financial markets and higher commodity prices.

This is a problem of political as much as economic management. It is imperative that European governments work with each other and with countries across the world to demonstrate that free trade and open financial markets are compatible with the widespread need for economic security and progress.

Imperatively now -- following the difficulties of the Doha Round -- we need to work together with increased effort to address the issues that caused the halt of the talks and revive the momentum so as to achieve a successful outcome for the world economy and for developing countries. There will be no winners if we fail on this ground.

The EU could do more to lift the current mood of economic and political uncertainty by extending the benefits of economic integration throughout its own neighborhood. This is a parallel but separate issue from the question of enlargement and ought to be pursued on its own merits. The benefits of this approach are already evident on the basis of long experience. On each occasion that the EU has welcomed new countries into its common economic space, the effect has been a dramatic and sustained rise in growth for the new entrants, matched by greater trade and prosperity for Europe as a whole.

Nowhere does this lesson apply more strongly today than to Southeastern Europe, a region of 10 countries and 140 million people with great potential to become an engine for future growth and prosperity in Europe. Most of these countries are poor by EU standards, yet given the opportunity they could reward Europe with a huge dividend in terms of extra growth and trade.

Achieving this goal will be a major undertaking for countries in the region, including those, like Greece, that are already in the EU. But it is also something that the EU as a whole should be actively committed to. And to this end, we should all eliminate trade barriers, improve the investment climate, foster cross-border economic and educational partnerships, boost infrastructure developments in transport, communications and energy, and encourage structural economic reforms. In this respect, the recent decision of EU ministers for economic and financial affairs to accelerate the establishment of a Western Balkan Investment Framework is extremely positive.

One thing is certain: Europe cannot afford to stand still in the face of current international difficulties. Inertia will increase popular cynicism and, with it, the threat of a political and economic backlash. We need to identify policies and initiatives to shed light on the practical benefits of integration. The effective implementation of the Lisbon Strategy and the consistent application of the rules of the Stability and Growth Pact remain imperative. Extending the boundaries of economic prosperity to include the whole of Southeastern Europe would be one way of demonstrating confidence in the continued vitality of the European idea.

Mr. Alogoskoufis is the Greek economy and finance minister.

Solzhenitsyn Was a Russian Patriot

By ROBERT CONQUEST
August 8, 2008

Those of us who had long been concerned to expose and resist Stalinism, in the West as in the USSR, learned much from Alexander Solzhenitsyn. I met him in Zurich, Switzerland, in 1974, soon after he was expelled from the Soviet Union -- the result of his novel, "The Gulag Archipelago," being published in Paris. He was personally pleasant; I have a photograph of the two of us, he holding a Russian edition of my book, "The Great Terror," with evident approbation. He asked if I would translate a "little" poem of his. Of course I agreed.

The little poem, "Prussian Nights," turned out to be 2,000 lines! Thankfully, he and his circle helped. It was an arresting composition, increasing our knowledge of him and his times -- something worth reading, and rereading, for its stunning historical background.

Ken Fallin

Solzhenitsyn was one of the most striking public figures of our time. How should one judge him? As a writer, up there with Pasternak? As a moralist, up there with Czeslaw Milosz? But he should also be judged as one who might have won two Nobel prizes -- not just for Literature, but also for Peace.

In his public capacity, he felt bound to stand forward as the conscience of his people. He said, in a July 2007 interview in Der Spiegel, "My views developed in the course of time. But I have always believed in what I did and never acted against it." Yet above all, he saw himself as a writer -- a Russian writer.

For most of us, Russian literature is like a triangle around Pushkin, Dostoevsky, and Chekhov -- Tolstoy is in his own class. Solzhenitsyn, on the strength of "August 1914" alone, competes in the Tolstoy lane.

He first came to attention in the Soviet Union, and around the world, in 1963, with the publication of "One Day in the Life of Ivan Denisovich." It is a short work, avoiding anything like sensationalism. Which is why, by great luck, it got permission to be printed -- as was not the case with his later works. But as Galina Vishnevskaya (wife of Mstislav Rostropovich, in whose dacha Solzhenitsyn lived from 1968 while writing much of "The Gulag Archipelago") put it in her autobiography: "The Soviet government had let the genie out of the bottle, and however hard they tried later, they couldn't put it back in."

"Denisovich" was followed by the well-known dramas which attended his whole career as a writer -- especially surrounding his masterpieces, "The Gulag Archipelago" and "The First Circle." Most readers will agree that Solzhenitsyn's status as a world-class writer and sage depended on these works.

In his last years, he showed himself, as always, to be a Russian patriot. But this led him to take political stances that have been seen as anti-American. Indeed, even when he lived in this country and spoke publicly, as at Harvard in 1978, he was hard on much of America's culture -- though he focused on U.S. intellectuals' delusions about communism.

"Prussian Nights" was about his role as an artillery captain in the Soviet Army's 1945 advance into East Prussia, a few weeks before his arrest for having referred disrespectfully to Stalin in a letter to a friend. It is also the first piece of writing in which one finds an American context.

"Forward, forward, the front surges," he wrote, through the darkening winter:

"Studebakers, to support us,

Are hauling lighter three-inch cannons.

'Hey, there, stovepipe! Grab our tail!'

Dodges, the three-quarter ton ones,

Rush the forty-fives to fight.

Shorty mortars ride in place

At the back of Chevrolets. . . ."

I saw these transportation vehicles myself in the Balkans, at the other end of the long front. Not much sign of anti-Americanism there!

But things change. In these last few years of his life, he not only further stressed his Russian nationalism, he made various attacks on American policy and behavior -- such as the NATO bombing of Belgrade (but not the Russian bombing of Grozny).

Some giants of Russian literature appear more preachy than is common in the West, a trait that brings us to what many see as weaknesses in the Russian tradition. First is the feeling, without basis, that one is somehow being cheated -- as in Gogol; second is a tendency to exaggerate or invent. Yet along with these weaknesses there is also painful honesty.

I did not sense the weaknesses when I met him. He was religious and Russian, but without exhibition -- though it became clear he embodied Fyodor Tyuchev's famous dictum that "Russia can neither be grasped by the mind, nor measured by any common yardstick -- no attitude to her other than one of blind faith is admissible."

He remained staunchly anticommunist, noting in the July 2007 interview in Der Spiegel that the October Revolution "broke Russia's back. The Red Terror unleashed by its leaders, their willingness to drown Russia in blood, is the first and foremost proof of it." He also hoped that "the bitter Russian experience, which I have been studying and describing all my life, will be for us a lesson that keeps us from new disastrous breakdowns."

Such was his consistent view of Stalinism. He now combined it with approval of, and honors from, the new Russia that many feel is an obstacle to international peace and amity. Ideas have unintended consequences, even those of geniuses.

Mr. Conquest, a research fellow at Stanford University's Hoover Institution, is the author of over 20 books on Soviet history and international affairs, including "The Great Terror: A Reassessment" (40th anniversary edition, Oxford, 2007).

Thank God for the Chinese Consumer

By ZACHARY KARABELL

Don't count out the U.S. consumer. For the past decades, that has been a ready rebuttal against predictions of economic doom and gloom for America and the world. The average American's spending capacity has proven more resilient than anyone could have predicted. At various points over the last 60 years it has supplied the ballast for companies domestic and world-wide.

Many believe that those days are now over. With stretched balance sheets, declining home values and stagnant incomes squeezed by rising fuel and food costs, the legendary U.S. consumer is certainly wobbling, even if not down for the count.

AP

Shanghai

But in the year of the Beijing Olympics, the assumption that a tired U.S. consumer will lead to a long period of stagnation is about to be challenged by the new kid on the block. The health of the global economy used to rest on the back of the American consumer. Now it will rely on the Chinese.

In the U.S. and Europe, public debate centers on China as a low-cost producer that puts workers in the developed world out to pasture; hence the popularity of antitrade legislation. But the real story is the rise of the Chinese consumer, whose passion for spending is remarkably American.

In the past two years, the average gross domestic product per capita in China has passed $2,000, and now is close to $2,500. That average lumps together 250 million affluent and "rising affluent" urban residents with another 500 or 600 million people living in rural areas (and whose income may or may not exceed a dollar a day). Another several hundred million more Chinese are somewhere in between.

That core of perhaps 250 million Chinese consumers -- especially in coastal cities -- actually earn closer to $10,000 a year on average. Given modest living expenses, they are left with considerable disposable income.

OLYMPICS OPINION

Leslie Hook blogs from Beijing, with commentary from Journal editorialists and the editors of the Far Eastern Economic Review.

They are eager to spend this income. True, China has one of the higher personal savings rates in the world -- in excess of 40%. But this doesn't reflect a wariness to spend as much as the absence of things to buy, places to put money other than state-bank savings accounts, and concern about health-care costs. That is now changing. According to a recent McKinsey survey, the Chinese love to shop and spend 9.8 hours per week doing it. The average American shops 3.6 hours per week. Forty-one percent of Chinese said that shopping was their preferred leisure activity.

Chinese consumer spending is currently at about $2 trillion, still barely a fifth of U.S. consumer spending. But the gap is closing: Whereas U.S. spending is growing by about 2% a year, Chinese consumer spending is growing by 20% a year. For many global companies, the rise of the Chinese consumer is the only thing standing between them and a decline in their business.

Take Yum Brands, with its Kentucky Fried Chicken and Pizza Hut restaurants. In the U.S. and Germany, it is barely growing and has anemic margins. In China, KFC is hugely popular and growing more than 25% a year. It has 2,000-plus outlets that constitute a fraction of KFC's global presence but account for a staggering 20% of the company's total profits.

KFC is one of hundreds of struggling U.S. and multinational companies doing booming business in China. Proctor & Gamble and Oil of Olay found new life selling to the Chinese. Nike has long been an avidly desired brand for young Chinese. Caterpillar, which has seen its U.S. business contract because of a weak residential construction market, has hardly been able to keep pace with the demand for its combines and earth movers in a rapidly industrializing China. Otis Elevators, a division of United Technologies, has an enviable backlog servicing China's endless skyscrapers.

Luxury companies ranging from Louis Vuitton to Versace to Coach look to Chinese affluence as the next wave to replace a waning Japanese market, an aging European one, and an unpredictable America. And, let's not forgot gambling. Macau recently surpassed Las Vegas as the most lucrative gambling destination on the planet. You can always tell a country's proclivities to spend based on its eagerness to gamble.

The rise of the Chinese consumer isn't simply a boom for global companies. Chinese exports to the developed world generate controversy, but China is now importing nearly as much as it exports -- $1.2 trillion a year -- and its imports from the U.S. have been skyrocketing. That doesn't factor in the goods consumed in China made by Chinese subsidiaries of U.S. and foreign companies.

At just about $4 trillion, China still accounts for less than 9% of global economic output. But many would say that, adjusting for purchasing power, it is actually quite a bit larger. In any event, China's rising affluence, uneven though it is, is one reason for the strong feelings of optimism and nationalism on the eve of the Beijing games.

The Chinese consumer is the only thing standing between hundreds of global companies and the abyss. While some U.S. companies may have cut jobs to outsource to China, think of how many more jobs they might be cutting if they were losing money or barely profitable. Caterpillar keeps its factories open in the U.S. because of what it currently needs to sell in China. So do countless other companies.

This is not a passing phenomenon, any more than was the rise of U.S. consumption. Given the chronic underestimation of China's growth, it's likely that Chinese purchases of foreign goods will increase more quickly than we imagine.

Yes, the Chinese like their own brands, such as Li Ning sportswear and Lenovo computers (Lenovo bought out IBM's personal computer business and itself represents a potential future wave of hybrid U.S.-Chinese consumer enterprises). But the Chinese are even hungrier for foreign brands, which are signs of rising affluence and modernity. That hunger is nowhere near sated.

To be sure, there are environmental costs to China's rapid growth, and tensions inherent in its rise. But as we turn to this controversial Olympics, it's worth asking whether any major country has emerged without causing concern elsewhere, and whether the world would now be better off if China were still wedded to rigid communist ideology and mired in poverty -- economic rights are, after all, a vital part of human rights.

Faced with the challenges of domestic growth in the U.S. and Europe in the years ahead, things would look a whole lot worse without the Chinese consumer.

Mr. Karabell is president of River Twice Research. His "Chimerica: How the United States and China Became One," will be published next year by Simon & Schuster.