Cobb

Currency Manipulation?

Suddenly we are hearing talk of Chinese manipulation of their currency. I think the hype is preposterous, and I am hoping that I can get a straight story.

What I know is that China has refused, for decades, to let its currency float against the Dollar. The value of the Yuan is basically pegged to the dollar. The exchange rate never changes. No matter where the American dollar goes relative to other currencies (clear enough?). Suddenly, this has been called 'manipulation'. Why? because some politicians tied to the American textile industry are crying foul about recent trade agreements that allow more Chinese clothing to come to the US. They want the Chinese Yuan to appreciate to the point at which the price of a t-shirt from China makes consumers buy American? Fat chance. I don't know about you, but I have no idea where my clothing comes from. The status of American clothing comes 98.5% from the brand of the store you buy it from, not the country of its manufacture or origin.

Already, the Chinese have increased internal tarriffs on textile products to be exported to the US in response to American pressure. That suits Chinese officials just fine. They line their pockets with that tax and Americans still buy more cheap products. What are we talking about? A dollar?

Here's something else I know. Chinese cotton and silk are the raw materials that are shipped outside of China, mostly to Nigeria and other West African countries, to be made into fabric and dyed. The fabric is then shipped back to China and sewn into clothing. So anybody concerned should understand that China is not single-handedly undermining free trade, but that they already are a player in a global market. It's not just China involved in 'Chinese' textiles.

It seems to me that the net result of floating the Chinese currency is going to be felt in a huge number of other ways and that the political pressure brought to bear for the sake of the trade deficity will have unintended consequences elsewhere. The trade deficit isn't the only consideration here, but the billions in Treasury bonds held by the Chinese. Already the (NPR) news on this story makes it sound as if something inevitably has to happen soon and that the Congressional rumblings on this matter must be attended.

How shortsighted can we be? For t-shirts.

Is That What You Think?

I am a regular reader now of Black China Hand, which I have been calling China Black Hand for some dyslexic reason. The other day he dropped a small IED on my head.

Well today in a conversation with a colleague I learned that China has an equivalent circumstance. He told me, just as Harry told Sally, that a Chinese and non-Chinese can never be true friends or lovers or family because of cultural diferences (read: food or language.) When I pressed him on why he thought that way he finally revealed that because of the racial superiority of the Chinese people, there can never be true equality between a Chinese and non-Chinese and since any deep relationship would require that...there can be no true relationship.

Now as an African American, this wasn't the first time I've heard comments on the racial superiority of such and such. What floored me was that it came from my colleague. This is a guy I had known for many years, I guy that worked with many Americans, spoke great English (even gave his son an English middle name) and for all intents and purposes did not seem to have much problems with non-Chinese...indeed he seemed quite comfortable in a non-Chinese setting.

I had this a little in mind when it came to writing on Sutpidity the other day. But still I hadn't figured out a way to pre-empt this kind of situation. How should I let it affect me? How do I let a racist presumption affect me? Could it disable me? In the end I came to the conclusion that this is the kind of thing which I shouldn't despair to be inevitably crippling even if it is inevitable.

On the one hand, I think I can expect that Chinese who learn to speak English will inevitably learn how to curse. The word 'Nigger' is taught. And I thought back to the 80s when everybody was sure that the Japanese were going to buy all the real estate in America up, including the Statue of Liberty. Yet somehow when it came to moving around the cities they were consuming, they would still somehow figure out not to go to the ghettoes or buy anything there, thereby leaving blackfolks just as poor in an overheated market. And yet I know that there are certain things that whitefolks are incapable of intermediating and twisting - so it was equally no surprise when tourbusloads of Japanese were going uptown in Harlem to suck up as many chitterlings as humanly possible. Chinese, unless they are informed by American culture, are not going to be able to do anything but ape the same racial stereotypes. I already know what American pop culture has right and wrong about blackfolks, so I cannot be insulted.

On the other hand, Chinese' own sense of racial superiority will contain it's own peculiar baggage. It will be a laugh-filled conversation, because that's how I do. It will be like finding out a person you admired actually beats his wife. Disappointing, but not disabling. I just feel sorry for fools, but only so much. A fool is his own worst enemy. I'll just (as Sun Tsu says) let that dead body float by, instead of going upstream to kill it.

So how, I might begin, is the rest of the world going to learn about Chinese superiority? Are you going to cause an eclipse and we're all going to bow down? Is Bruce Lee going to be reincarnated? Are we suddenly going to start dreaming in Madarin? Are you going to gather us all up in boxcars and send us off to Manchuria, or wait, didn't the Japanese already do something like that to you? Are you going to poison us with MSG?

It's going to be a laugh riot. And then I will confide to my new confidant, that I'll keep his delusions close to the vest and not let anybody important know about it.

Hee hee. Hoo boy. Them Chinese. Real sense of humor they have. Whooo. That's funny.

Wait. That's not all. Did you hear the one about the Chinese manufacturer who want to call his new car the DooDoo? Oh.. I can't take it.

Ka Shr

'Ka Shr' means but. As anyone with kids knows, it's the first word out of the kid's mouth when you crack down on her, but not her sister who was right there doing the same thing, just not as loudly. Now that I have discovered The China Black Hand, I have some expectation that I get to be the less offending sister.

Not that CBH is particularly offensive, in fact it's damn interesting. I wish he would write more and quote less. But he's enough to the left of me that when it comes to African American Expatriate Chinese Bloggers, it won't be me that falls over first when the CCP cracks down.

As in every other experience in my life, there was always another black person interested in doing the same thing. One of the reasons I pay little attention to sentences that start 'black people dont' is because black people do. Whatever, wherever, whenever. We have always been large enough as a nation of folks to have experience wherever. There may be a whole lot of buttermilk, but there is definitely more than one fly.

Be all that as it may, the question of democracy in China is an interesting one. I have come to accept that in my own small way, I will inevitably be responsible for influencing people. I am convinced that there is a new and evolving kind of management style that bridges some of the gaps between what we mean when we say democracy, and the bad old days.

I ask in something of a provocative way, because I sense that CBH would ask me the question, what indeed would be the usefulness of democracy in China. That begs a lot of questions, namely, what is it about democracy works well and is valuable in America? I think when it comes down to it, simply voting is not the answer. So as I mulled over these matters yesterday, I found myself arguing that 'democracy' is inevitable in China, but it won't change much.

The syllogism goes a little something like this. There is a difference between power and control. If you decentralize the power of the CCP, then you will lose control, but you will not lose power. The power of the CCP, or any centralized organization, lies in its ability to command resources. But in a decentralized 'organization' it is the networker who gains power, and it is the substrate of the networking that becomes indispensible. This is just what Scott McNealy was saying forever. The network is more important than the computer.

The great advantage to the CCP or the American Executive Branch or any such central organization to decentralizing, is that you determine exactly what it is you want to decentralize and what authority you want to keep to yourself. This way you diffuse responsibility of those things you try to control but really fail to control, and you retain responsibility for those things you truly control. This is 'democracy'. The important question is what things you retain absolute authority over as to whether your authority is deemed oppressive.

In the US, people have a wide variety of choices when it comes to consumer goods, and even political views. But they have no choice when it comes to matters of monetary policy, foreign policy. So when the government makes certain monetary policy decisions that have broad implications, the results and broadedn or constrain the choices of consumer goods or political views that the general public has. However, since the governmnet is not in direct control of those things, only a very sophisticated analysis can draw the causal link. The masses do not and will not. Only a very expensive and well maintained revolution will allow the masses to retain the link and seek to unseat those in power. But authoritarian regimes, those who seek to control most everything, like consumer goods and political views, will always make mistakes. And since they are always seek control, they will always take the blame. This is the cause of their inevitable downfall. They are too large a target, and everything will get blamed on them.

A smart central authority reduces the size of its control but maintains links and networks to broad areas in society. This way it decentralizes and delegates and puts a buffer between itself and the masses, which it cannot and never will control. A wise strategy is to pursue the decentralization of consumer matters and political 'correctness' and retain control over other areas, like civil infrastructure, military forces and the administration of economic policy, foreign affairs etc, on the model of the US. It isn't clear whether or not matters of health care should be public or private, but I am leaning towards public.

As Laosan mentions, it doesn't make sense for the central Chinese government to get blamed for every insurrection in every village in China. This is where they ought to decentralize. They are going to have to learn how to tolerate a certain level of rebellion, because suppression of it is ultimately more expensive than letting fools have their way.

What I don't know is how deeply felt are the divisions of Chinese regions. I believe that their unity is more organic and historically rooted than that established by the USSR, and that federation would work very well in China if it came to that. Even so, I would encourage every hamlet in the wider area to elect their local representatives, rather than establish any regional positions. For that to work under any circumstances, I believe very strongly is going to take at least a generation. Any reform faster than that would be revolution, and revolutions are always bloody. That's why I'm against them.

So the question I am likely to have for my more liberal brothers in Asia is whether I represent, as a beneficiary of the Civil Rights Movement in the US, a revolutionary example of the power of democracy. I think I have a persuasive argument that ours was an evolution of reform which was enabled by a mature democracy. I mean it took 100 years. There were no beefs in 1965 which didn't exist in 1865. Even so, the state of 'managerial science' has advance considerably. We know how to speed the pace of organizational change without hitting a violent inflection. We can work at the speed of revolution and yet have it be reform, maybe. Either way, there's no need to rely on the marginal capacities of the grass roots to effect the kind of change that ultimately benefits everyone. But that takes wisdom.

All Look Same (dot com)

A self-described twink associate of mine pointed me to this site. As soon as you stop laughing, take the test. It ain't easy. I got a seven. I think I could have done better, but I was too busy cracking up. Seven is very bad, it's also average.

I'm not sure how serious they're taking the test, but it's a good diversion for a minute.

"Community"

I spent too much time at the Y today.

There's something about the unmistakeable flavor of watered down fruit punch that lets you know that you are at a boring function and it's just about time to get out. If you have a paper plate in your hand as well, it had better be a picnic. But if it's indoors, you're too late.

It's that time of year again. Winter Program. The offspring did an admirable job at their school's function. M10's duet in the last piece of the evening came the closest any of the acts got to a standing ovation. F9's little speaking role got the appropriate laugh, and F7 got a chance to stand in the front row for the 2nd Grade singers. All in all the family's rep at the elementary school is in excellent standing. But the YMCA is a different story.

I complain too much but this little gong show only carried the thinnest pretenses of a real community happening. After each and every of the 12 acts, another slice of the mob of parents abandoned the chairs and prime videotaping vantage points they squabbled to get in the first place and headed off elsewhere. By the time we got to Act 12, my two daughters' Jazz/Hiphop/Modern Dance Recital (otherwise known as pre-teen booty shaking, but not too much), two thirds of the joint was deserted.

Hey, I'll admit it. I was in the second to last row of plastic fold up chairs enjoying the hell out of John King Fairbank's "China: A New History" and was too deep into making sense of the effect of Buddhism in the wake of the Early Han Dynasty. I did my back of the hand opera claps when every one else did, but I wasn't really being much of a good citizen. Why fake it?

I'm thinking about how interestingly powerful and yet shallow is our multiculturalism. I mean, I've known since I read 'Japanese by Spring' a dozen years ago that nobody is really serious about capital M Multiculturalism. And while reading about the rise and fall of Chinese empires this realization slapped me around a bit. I've stepped back and started thinking about civilizations, and it's screwing with me a bit. But now that I understand about 50 words of conversational Mandarin (pu tung hua), pardon my pinyin, the distance between us neighbors is annoyingly evident.

At my Y, there are a hefty number of Chinese families, who until about a week ago were relatively undifferentiated Asians to me. Sure I have a native Californian's ability to distinguish Japanese from Chinese from Vietnamese from Korean just by looking at folks in the face, listening to the rhythm of the language and checking their body language. But none of this registers with the smacking finality of beginning to grasp meaning in their heretofore unintelligible blathering. I had no particular reason to watch or listen intently or try to decypher their conversations until now. These days I listen to AM 1300 and hang out in the Ping Pong Room just to get familiar with the cadences.

But I broke the shell this morning and excused myself to venture out a sentence or two. You see, the Y has excused itself from providing ping pong balls. So when a table was finally free, I had to cadge one off one of the Mandarin speakers. M10 and I were there listening for him to say 'ma' at the end of his sentences so we'd know they were questions, and I had inadvertantly left my idiot 'Chinese in 10 Minutes' book out of my backpack, which I take nowhere near as seriously as the Pimsleur CD course I play in my car everyday. So while the (dweh bu chee) excuse me didn't raise an eyebrow, the (syesye ni) thank you got half the room laughing. What the hell, I did get a ping pong ball out of it.

It wasn't until 3 minutes later when he mentioned the title of the book to more laughter that I started feeling like an idiot. Surely the whole scenario made it appear as though I might have purchased the book for ping pong room conversation, then again I can't decrypt Chinese laughter. But it was the clear change in the tone of his speech from then on which was messing with my mind, plus the fact that M10 can't resist hitting the ball hard but it never stays on the table. Bottom line, I'm embarassed. Plus, the old Chinese guy that I usually talk to wasn't there at all.

I did explain to Boy that inflection is everything in Mandarin. Like most black dads, I have a series of non-verbal grunts that I use in everyday family life which are implicitly understood completely by inflection. Further I have used to fairly good effect some parallel rhythms and cadences to help me wind phrases together, my favorites being (wo shwo da bu hau) and (jr dau, wo jr dau). The Chinese also use a construction which translates almost literally to "a little somethin' ". For some reason, I almost immediately feel like I've always known how to say (ni xiang tchr yidyar dong shi ma), so if you want to eat a lil sumpn sumpn, I'm the man to ask you in Mandarin.

As confident I am in my growing yet piddling language skills, I know there is terrain I'll never navigate with much confidence. I took 4 years of French and I absolutely hated ordering in Paris restaurants. I can accept on one level that I will look as foolish as some of those 6 year old Chinese girls dancing in my daughter's hiphop recital even though the very prospect grates. Somehow I am going to have to deal with the laughter and disrespectful regard of the natives as I go hang out on their turf. It may be that I'll only make social inroads with subordinates and synchophants. I'll be a haughty misunderstood uppity negro on the other side of the planet too. I can live with that.

My attitude about solitude and isolation is becoming rich, and it is in that regard that I am finding a moral tug. I am thankful and fortunate that I reach this state of mind without regret for anti-social mistakes. I have always been goodhearted in that respect. I am just coming to understand the deeper implications of the openness with which I have lived my life, especially in my writing; it's so deeply a part of me. The necessity of recognizing interdependence is critical, otherwise old men die alone and friendless. What could be worse? I could ask Qing emperors, I suppose. They didn't see it.

In my learning Mandarin and in the efforts of millions of Chinese to learn English there is great optimism. I believe that if Multiculturalism is anything it ultimately must mature to that level, despite the difficulties. I'm not sure where it goes from there or what might not happen without it, but it clearly allows me as a middle aged man the opportunity to see the world a completely different way, which is a stunning development as far as I'm concerned.

I can't say with much certainty that the opportunity I feel personally is matched by a general optimism at the prospects for our two civilizations, despite the fact that it is indeed the theme of my new business venture. It's going to take a lot of time to find the tactical and strategic commonalities. It's harder than music appreciation. Ultimately, we're talking about managing huge amounts of power between us. Our ways and their ways are very different...

I have a feeling that I should just shut up and read Kipling. More later.

Ching, Ni Shwo Man Yidyar

This week I'm going to get a CD to play in the car or on the computer. The spousal unit picked up a cassette from the local library but I really have poblems with analog tech. Besides, the distortion was crazy freaky. I could hear about four levels of echo, as if playing the tape so many times had shifted the magnetic substrate several times.

I clearly can recognize the language as compared to Japanese, Korean or Vietnamese. Chinese comes mostly from the front of the mouth. Spoken at something of a monotone (if the announcers on the radio are any indication) the inflection within words is very subtle. Whereas Japanese inflection and rhythm is a completely different. It's spoken more in the throat, louder it seems. French is a back of the throat language too, but all of these are easier than Arabic, which I don't think I'd ever be able to speak with any appreciable speed.

Chinese seems easy on the mouth, but the difference between a dz and a sz might give me problems. Also the way things are translated into English and English phonetics is going to trip me up a little. For example I know I've seen 'jyang' and 'jiang' spellings for the same word, as weel as 'boo' and 'bu'.

It's going to take me at least a year to be as bad with Chinese as I am with Spanish, but at least when I listen to Spanish on the radio, I can pick out enough words to know what the converstaion is about. On the other hand, it's a good excuse to get some more Jackie Chan movies.

Muzimei

Muzimei, a Chinese blogger has gotten her ISP shutdown, apparently for releasing the names of the men she's slept with. Fascinating. I wonder if mentioning her name here would bring me traffic or comments. I am very interested in knowing whether or not as an American blogging in China, I would bring negative attention from the authorities, since I don't even consider what consequences might arise from my writing here.

Anyone?

I'm also checking a few expat sites, since I'm on the late freight with this.

The China Outlook

I met with my new partners last night and they outlined to me some of the plans which have netted them a great deal of investor interest, actual cash, and American execs poking them on the shoulder saying "Can we work for you, please?". I have to say that this is one of the most exhilirating weeks I've had in my life.

So the outlook for me taking the position is excellent. The prospects for making a nice pile of Yuan is also very good, and the experience of my partners in China at or near the top of the pile is quite encouraging. One of the commenters at Dresner says that China is a civilization masquerading as a nation-state. That's quite possible. I'm looking at it as a very very large corporation with a set of executives that we all desparately hope know what they are doing.

A couple things are clear, and several other things I'm learning are new. The first thing is that the more you believe in the greatness of a nation being defined by the industriousness of its middle class, the more you will have to admit that China is well on its way to inheriting that mantle from the United States. As a corrollary to that, it should be well understood that the closeness with which we deal with the UK is likely to be replicated after we 'get over' the transition. In this, the era of the global small business, the consequences could be that such a transition will happen without an armed conflict. This is my hope, and quite frankly, my investment.

I imagine that there may still be some purists after a fashion who might suggest that Sony is not an American company or that Toyota doesn't make American cars. And yet I think they would have a very difficult time convincing others that Spiderman is not an All-American film or that the Prius doesn't appeal to uniquely American sensibilities. I hardly think of the Netherlands when I fill up at a Shell station. Who says 'Royal Dutch Shell'? But the reality is that such institutions are deeply engrained in American life. What we eventually got over with the Japanese, we must inevitably get over with the Chinese. And so if and when it comes to banking or military might, that might not be so easy, but at the commercial level, I think we'll handle things just fine.

As a market, the American middle class, rounds out to about 70 million households. In China, those with equivalent purchasing power is about 4 times that. I'm not certain that the current status of the corporation, short of what Wal-Mart has achieved over the past ten years with its brilliant use of information technology, is ready to handle such a market. It's easy to say that the same ideas will work, but I strongly believe that a great number of business plans, and companies organized around such business plans, will not scale. I believe that selling to a global market of say 700 million, there are only a few corporations who are ready willing and able. So as this market of consumers evolves in China, nothing great American corporations take for granted will work of necessity. Nor will businesses born and bred in China necessarily have the magic to handle this expansion. What I think is going to happen is that there will be many companies who are successful initially, but will get slashdotted by too much success. It's one thing when your call center can handle 5 million calls to complain about your product's failure, but what about 50 million calls the next year?

Here's the surprising anecdote. Not 7 years ago, GM built with about $3 billion several state of the art automobile assembly plants. And why wouldn't they make them state of the art? China pays good money. What you don't hear is that now, something on the order of 40% of GM's global revenue (or is it profit, I don't remember) comes from those new plants. When GM went there, they understood that they would be catering to the upscale crowd. So they figured that the Chinese would want Cadillacs. No. The most popular GM car in China for the bling bling set is the Buick. That's what they love. Hmm. Maybe Tiger Woods knew something we didn't after all. Maybe not.

The moral of the story is that the Chinese consumer economy may be as familiar yet as strange as the Buick. Perhaps Pepsi will beat Coke over there. Maybe their favorite NBA team will be the Houston Rockets but because of Juwan Howard, not Yao Ming. Remember that we called it 'space' and the Russians called it 'the cosmos'. Modern China will be the same as, but different from the US. And like two overlapping circles, there will be some that is mutually exclusive, and I think a lot which will be excitingly brand new.

Let's keep one thing in mind, the Chinese, like almost nobody else, want to be like us and better. That means they are heading in the same direction. They don't hate us because we send a few billion to Israel. To them that is a pittance in a pot. They don't hate us at all. They envy our economy and infrastructure and they're working hard to get their own up to speed and beyond. They run their country like a corporation, not a democracy. Right now they're spending. Think about it.

China Tech: First Look

CTN are the first initials I know. The first is for ChinaTechNews and the second for ChinaTravelNow. These two seem to be fairly decent sites that I'll be scoping out.

On Kudlow & Cramer the other day, they had a cat on who was a securities analyst who said the big stock play is of a company that sounded like 'Outlook'. Cramer was saying that it might be the next 'Shanda'. So I checked out what Shanda was, and it turned out to be the number one gaming developer over there. Fascinating. That's going to be part of my task when I get there.

Following Shanda takes one to a number of interesting places. The first place I found was here at Pacific Epoch. I expect that to be a regular site for news in the sector. Speaking of which, DigitalChina is also one of the 800 pound gorillas to be paid mind.

Now I need to figure out what decoupling the Yuan means.

China

Adding this new category to my blog, I'm starting the journey towards a greater understanding of China and things Chinese. I've started (sorta) by getting into an argument about the war in Iraq with a cat who runs a site called PekingDuck.org, but there's a lot more to learn. A lifetime to be sure...

So my first stop is to check out LonelyPlanet.com and see what they have to say there. Since I'm a blogger, and I understand that China has only one ISP, it may be difficult to blog from Beijing. We'll see.