Stat of the day: American’s in China

While the number may have increased this past year, as of June 2012 there are around 70,000 American’s in the Middle Kingdom:

There are about seventy thousand Americans living in mainland China today, according to the Chinese and US governments. A lot of the Americans in China only stay for a few years, but then there are others — American ex-pats who’ve lived in China for a decade or more with no foreseeable plans to come home. Who are they? And how Chinese do they become? Evan Osnos has this story, which starts with an ex-pat named Kaiser Kuo. Evan is a staff writer at The New Yorker, where he writes the column Letter from China.

From Chicago Public Media’s This American Life

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Another Brick in the Wall: Link Edition VIII

Below are a list of mostly business-related links from the past two weeks (mostly about China).  Thanks to Kevin C and Sinocism for most of them.  The first half are from blocked sources, I can recommend a few VPNs if you need (that I do not have any financial stake in).  The number in (brackets) is the book chapter that more detailed information about the topic can be found.

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A friend discusses alternative wealth management products (WMPs)

In Chapter 5 and 17 I briefly mention that due to the current legal and financial system on the mainland there are very few financial alternatives and investment vehicles to park funds.

As a consequence, wealth management products (WMPs) such as trust companies are a new type of wealth management service that collectively amounts to more than $1 trillion and is considered to be an integral part of a “shadow” banking system (e.g. off-balance sheet transactions).  According to Xiao Gang, chairman of Bank of China, there are 20,000 WMPs in circulation currently.

It should be pointed out that the term “shadow” has been hyped up and distorted by many analysts to mean the equivalent of “shady” and “fraudulent.”  In economic terms, while there may be illicit or fraudulent activity taking place (e.g., money laundering), all the “shadow” activity technically forms part of the larger informal economy.

That is to say, given continued financial reforms, some of these 20,000 WMPs could eventually integrate and become part of the formal economy.  While there may be any number of pyramid and Ponzi schemes in this segment, this is not to say that the entire $1 trillion under management will all collapse into nothingness (it could, but you cannot say it a priori).

How does it work?

I asked a Chinese friend, Kevin C, to briefly explain how he manages his assets in this alternative system.  Here is his response:

I began my first “shadow” investment in the early part of December 2012.  The “shadow” bank system offers different deposit terms ranging from 1 month to 6 months and sometimes up to12 months (which is the longest).  Most companies originally offered interest rates from 17% per year last year, however this has been reduced to 13-14% per year now.

There are more than ten public companies operating this kind of private investment path and promote it via their websites.  In order to open an account, you need to register a user ID and mobile number.  In addition, you need a Chinese National ID Number, plus your personal bank account number which will be used to transfer money back to your account.  In practice, I have placed 80% of my capital in the 1 month term,15% in a 3 month term and 5% for longer terms.

I try to choose the company carefully before make my own investment and of course there is no single website can guarantee 100% safety.  However, if it doesn’t look like a short term business for those companies which I believe, as long as they offer a one month product, I think it will be relatively safe to me.

As far as trying to fund it through debt like credit cards, I looked into taking out a simple loan and found out that the monthly interest rate that I would owe actually outpaces what I would receive in return from one of these private investment plans.  So I am actually using my own money to try this out.  So far so good.  And even though I still worry about the risk, as I said before, the one month term is the most attractive to me for this reason.

Again, I am not endorsing this service.  In fact, it is really hard to see how this particular service can provide these high rate of returns in the long term and may in fact be powered solely through speculation and exuberance.

Perhaps these 10+ firms Kevin mentions do not even reinvest the capital into actual productive projects but merely recycle the money to other customers cashing out each month.

Or perhaps other customers do fund a lot of their investments through debt (e.g., borrowing to reinvest it into one of these 10 firms) and have a great deal to lose in the event one of the companies goes bankrupt.  Either way, this was just an example to give you an idea of what the process is like.

For more on this topic see:

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Another Brick in the Wall: Link Edition VII

Have a really bad cold and temporarily lost my voice.  Below are a list of mostly business-related links from the past two weeks (nearly all about China).  Thanks to Mark Dreyer and Vincent S for a few of them.  The number in (brackets) is the book chapter that more detailed information about the topic can be found.

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Errors and changes

The anonymous manager I interviewed in the education chapter recently sent me an email to clarify a small error.  She says:

Only one point I’d like to verify: “they could charge enormous tuition fees, upwards of 400,000 RMB [$64,000] a year primarily because there was and still is a large demand for authentic face-to-face experiences.”  The price is not that high, should be around 100,000RMB for VIPs.

For those curious as to how you can modify a digital copy published at Amazon after it is live the answer is, you cannot (yet).  If there is a 2nd edition I will be sure to include the change.  Also an open offer: if you see any other errors or misrepresentations please drop me a note.

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Stat of the day: agricultural growth over the past few decades

Despite several current issues facing some of China’s farmland (e.g., shrinking arable land, soil pollution, toxic water), a substantial amount of progress has been made in the past three decades of reform:

The trajectory of rising agricultural productivity was similar in post-Mao China. China’s population doubled, and its GDP rose 45-fold. While the amount of land harvested for corn in China also doubled, each acre produced 4.5 times more than it did in 1960. Ausubel and his colleagues calculate that rising Chinese corn productivity spared 120 million hectares (an area more than twice the size of Texas) that would otherwise have been plowed up. The United Nations’ Food and Agriculture Organization reports that Chinese forests expanded 30 percent between 1990 and 2010.

Via: Peak Farmland?   See also: Ch 3 & 18

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Another Brick in the Wall: Link Edition VI

Below are a list of mostly business-related links from the past two weeks (all about China).  Thanks to Sarah M and Sinocism for a few of them.  The number in (brackets) is the book chapter that more detailed information about the topic can be found.

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Shanghai BarCamp 2013

About a week ago I mentioned a Shanghai geek/tech event called BarCamp.  Unfortunately I was unable to attend, but a good friend of mine, Veli-Antti Ruismäki, was able to.  Here are some of this thoughts he emailed me:

I attended the Shanghai BarCamp on March 23 at the Hult Business School. A day of exhilarating topics ranging from agile project management to decision theory and negotiating tactics to gamification and 3d-printing meant I walked out with a ton of new ideas and refreshed views on things.  The event boasted 40+ topics so there was sure to be something for everyone. A must-go when they organize it again next fall.   Maybe I’ll even present something myself next time.

Have you attended any similar events or expos on the mainland recently?   Send me a message and share it with us.

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Another Brick in the Wall: Link Edition V

Below are a list of mostly business-related links from the past two weeks (all about China).  Thanks to James T and Sinocism for most of them.  The first half are from blocked sources, I can recommend a few VPNs if you need (that I do not have any financial stake in).  The number in (brackets) is the book chapter that more detailed information about the topic can be found.

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