China Esquire

Just saw this article in Legal Week about Weil Gotshal poaching 2 corporate partners in Hong Kong. Seems like the perfect time to pick up some more partner level attorneys: when the economy is down, but supposedly getting better. Article after the jump.

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While I was driving this morning, I heard on National Public Radio (NPR) locally that James Fallows is speaking about China’s Economy this morning.  (the talk is right now, but because I am in meetings, I cannot listen at the moment)  He’s talking about his article for next month’s The Atlantic entitled, ” China’s Way Forward.”  But I figured that some of you may be interested.  Details about the program and link after the jump.

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And it also seems like everyone who is trying to implement one is also having a harder time trying to get it off the ground quickly.  Hopefully it will at least be done in a “timely manner”…  I say this because I’ve been watching the U.S. news and noticed that the bailout package hasn’t been in the news (of course, there were elections), but the news that has trickled out appears to show that the bailout needs more time to take effect than everyone was hoping for.

Well, here comes China with their stimulus package, courtesy of the Wall Street Journal, “ China Sets Big Stimulus Plan In Bid to Jump-Start Growth” ( h/t to China Venture News, that was quick):

China unveiled an economic stimulus program it billed as totaling $586 billion, aiming to bolster domestic demand and help avert a global recession.

Though the two-year package appeared to include some previously announced measures, its size was clearly designed to revive the fading confidence of Chinese businesses and consumers, and impress foreign governments. Asian shares rallied sharply early Monday on the Chinese announcement, with benchmark stock indexes in Tokyo, Hong Kong and Shanghai all jumping close to or above 5% in the early hours of trading.

The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China’s six trillion yuan annual budget for this year.

The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies.

Although Chinese officials have been meeting daily on the financial crisis, most observers hadn’t expected leaders to reach final consensus on a stimulus plan until an annual economic-policy meeting scheduled for the end of this month. The rapidity of the response underscored the government’s concern about the growing risks of a real downturn.

The rapid response of the government’s concerns are, of course, well placed.  As the news media trumps the looming downturn (borderline Great Depression, which I think is slightly extreme), it’s absolutely killed investor confidence.  In other words, the self fulfilling prophecy is happening.  So China wades into the waters, which is impressive.  But stuff like this takes time…

China’s economy won’t be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold.

Beijing has long held that economic growth of at least 8% is needed to provide the improvement of employment and incomes the ruling Communist Party relies on for popular support. China’s growth has slowed to its weakest pace in five years, with output expanding just 9% in the third quarter from a year earlier after gaining nearly 12% in 2007.

That’s the ultimate kicker though.  Change–any sort of change–takes time.  Hopefully what China enacts will come in time to help the global economy. Sadly, that may not be the case.

Well, it’s what I had expected.  Now that the media battle is over, let’s get focused on getting back to work.  I truly hope that Barack Obama ends up being a more positive figure to China and China/foreign trade now that he can stop talking tough for his constituents, and also, be a little more realistic about our nations’ mutual need for one another in a global economy.

Even CNN ran an article a few weeks back (had it sitting in my inbox) entitled “ Why the U.S. Needs China“:

China’s economy is not going to grind to a halt. But even a marginal slowdown could hurt large U.S. firms. Many of them have been able to offset sluggish growth in the United States with sales to China and other developing markets.

And it’s not certain that China’s economy will continue to keep expanding at such a rapid pace in the next few years if this credit crunch continues to persist for much longer.

There is already some evidence to suggest that the two nations may need to work together to avert more global economic pain.

When the Fed announced a coordinated interest rate cut on Oct. 8 with banks in Europe and Canada, China’s central bank also lowered interest rates that day.

The Fed’s announcement didn’t mention the Chinese rate cut and China’s central bank didn’t acknowledge the rate cuts in the United States and Europe. But does anyone honestly think that the United States and China coincidentally decided on the same day to lower interest rates?

Make no mistake. The two countries clearly realize they need each other and that economic hardship suffered by the other is not good for either. China may not have the exact problems that the U.S. does but its third-quarter GDP slowdown is definitely a sign that the credit crunch is hitting China as well.

Mr. Obama, I hope one of your people is listening.

Review time again. There were a lot of good articles this week such as Andrew Hupert’s talking about WFOE’s, but since I already shifted gears all week to cover the Sichuan Wenchuan Earthquake, I figured that I would do so in weekend review. (Yes, China Esquire focuses on society as well)

Going Global did a very interesting post on what American high school students are learning about international relations. Remember, these sort of kids are going to be the future of the global economy… that can be a scary thought. But in America, it is true that students need to learn more and more about international relations if they are going to compete in the modern world’s markets. Craig talked about some problems he noticed:

Among the concerns with secondary education today is that in teaching to the lowest common denominator dictated by standardized tests, the average American high school student is woefully undereducated in subjects critical to the world of the future (and today of course), particularly math and science. Add international trade to the list of subjects in which a good education is lacking.

I have the pleasure of serving as a mentor in a program for students attending one of our local large urban public high schools. When I asked what they were working on, I was momentarily pleased to hear that they were studying international trade. My pleasure turned sour when I asked what he was learning about global trade. His answer:

Basically we’re learning how international trade is good for rich countries like the United States, but that it’s really hurting the poor countries in the world.

My mentee’s teacher is not alone of course in substituting a belief in a political ideology for a grounded understanding of international economics and business. An example of this school of thought is found in Antonia Juhasz’s book “The Bush Agenda, Invading the World One Economy at a Time” in which the author argues that the only country benefiting from globalization is America to the point that she believes that globalization itself is a conspiracy between the U.S. government and its large corporations to use global economics as an express arm of foreign policy enabling the U.S. to assert its hegemony on the world without having to resort to strictly military means.

I also wonder how my mentee’s geography teacher addresses the real world juxtaposition of the experience of countries such as China and India when contrasted with countries such as North Korea or Myanmar. Not too long ago, both China and India had nationalistic policies that isolated them from world markets. They were also among the world’s poorest countries. Since fully embracing international trade, of course, they have become shining examples of the ability of expanding markets to produce widespread economic opportunity to a previously destitute population. Meanwhile countries such as North Korea which have regimes that continue to isolate their people from world markets in order to keep the citadel walls around their autocracies remain countries with the most abject poverty.

My student told me that his teacher particularly focused on poor countries in Africa as examples of how international trade keeps poor countries under the boot heels of wealthy nations. As discussed elsewhere in this blog, interestingly the problem many countries such as those in Africa have with making headway in a global marketplace isn’t international trade, but the lack of free trade. The principal products that many of these countries could naturally export in order to gain the currency necessary to participate in international trade are agricultural. But it is in agriculture that the wealthy nations are most protectionist both in terms of subsidies to their domestic agri-businesses and tariffs on the import of agricultural goods from elsewhere. This is exactly the problem that the Doha round of trade talks is trying to address — talks repeatedly scuttled by the wealthy nations’ insistence on protectionism, not the existence of free trade.

We need to adequately train our youth to understand the global economy, and I think the bottom line is that we need to teach them facts and examples, not ideological/theoretical perspectives. The young will learn plenty of those in college. Ultimately, it is facts–case studies–that are going to be of the utmost importance because theories are nearly always adjustable. Being grounded in reality is the only way to learn IR… and a lot of other things in life as well. I think Craig catches these quite well in his post.