Entries Tagged 'China' ↓

There was a mini panic in the financial markets recently when the 10 year and 30 year U.S. Treasury yields rose significantly in one day.  The 30 year bond’s yield is now over 4.5%.  This is due to the fact that the central bank has been trying to push long term rates down by announcing that it is buying an additional $1 trillion of U.S. agency debt.  It seems like bond buyers are no longer taking this manipulation of yields, and they are demanding the interest on their investments.  What does this mean for little guys like you and me?

First of all, I am glad that this is happening because I am just sick of all the efforts to push down mortgage rates  when there is no good reason to push it down.  Higher mortgage rates will encourage people to borrow less money, and push down housing prices.  That is not a bad thing on both counts. People will buy houses when it is affordable and reasonable.  Many people are buying right now because housing prices have come down dramatically, and not because of the historically low  mortgage rate. New homebuyers may not be able to lock down mortgages under 5% any longer, but the dip in prices to come may just make up the difference. The only negative is for those who are waiting to refinance, because those below 5% rates are now gone.

Higher yields on treasuries may also make those in charge of the  U.S. government think a little bit before they issue more debt. They need to know that they cannot make every bond buyer pay extremely low rates and this endless borrowing needs to be controlled. If the U.S. government spent and borrowed less, then our taxes may be lower.  However, these higher yields will just mean that Americans will be paying more in interest for years to come with their tax revenues.  This is unfortunate, but bond buyers are investors who should not have to accept rates that do not match the risk of the investment.  For what it is worth, I think right now the yield on 10 and 30 year treasuries is still fairly low so the U.S. is still getting a fairly good deal.

Some other effects I am hopeful about is that perhaps short term rates will follow on the upward trend and savings rates will go up accordingly.  The worst scenario is that inflation is going up AND savings yields are still abysmal, and in a way that is sort of happening now.  Inflation isn’t tremendous this year, but I am noticing some small increases in gas and food prices.  Additionally, wage growth is fairly small all over the board due to the recession.

Anyway, the Obama administration tried to reassure  China that its holdings are safe by pledging that the U.S. will try to reduce its budget deficit and eliminate the market manipulations by the government.  I personally think that China’s worries are justified because actions speak louder than words.  If the U.S. is really trying to reduce its budget deficit then it shouldn’t pledge more and more borrowing and spending.   The fact that Geithner had to make such a trip to reassure Chinese leaders shows that the U.S. government is feeling insecure about its debt situation and that does not inspire confidence in the bond market. China really has no obligation to buy trillions of U.S. treasuries and China is free to invest its reserves however it wants.  If China’s reluctance to lend encourages the US to cut its borrowing and spending then it is a good thing for  United State citizens in the long run.

In conclusion, the stock markets are showing signs of recovery, so this will probably push bond yields higher since there will probably be less demand for bonds.   This is good news for everyone who has money in the stock market.  It is reasonable that bond yields are going up, and it is nice to see some market forces push back against the heavy hand of government intervention.

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Today I read an article subtitled “Could Silicon Valley become another Detroit?” Essentially it is a warning from the executives of HP about how the government’s lack of investment in science and technology could spell the doom of America. A senior fellow at HP Labs named Stan Williams saw first hand that countries like India and China are investing billions in research while America is spending billions on bailouts for failed companies. Here is what I have experienced in this matter.

One thing that stuck out to me is that the reporter pointed out in Williams’ lab, “only 18 of the 75 scientists were born in the United States, and 10 of those American-born researchers are over 50 years old; only six are under the age of 35.” My experience in the Valley is that many people who work in high tech are foreign nationals and most of these people are either Chinese or Indian. So where are all the Americans? I think the problem is really quite complex and is a mixture of culture and the basic fact of population. First of all, the popular American culture is not nearly as obsessed with higher education as Asian countries like China, India, and Japan. In China you are pretty much expected to get at least a Master’s degree and it doesn’t surprise me that China invests a lot in its education system. In America kids are mostly taught that they could be anything they want, and that is a good thing.  However, most kids just want to be popular and accepted, and being a science geek will not win any social points. This is not to say that Americans do not value education, but a major problem is that higher education can be prohibitively expensive in this country. Even public schools cost tens of thousands of dollars a year and I am sure a lot of capable students are just priced out. Recently there was a report measuring higher education affordability and only California got a passing grade of C- for its large system of cheap community colleges. Finally, the irrefutable fact is that the total population of Chinese and Indians in the world is about seven times the population of Americans so there is a much larger talent pool to choose from. When you couple that with the fact that most Chinese and Indians are ingrained to study math and science from birth, it is really no surprise that there are less American scientists.

The good news for America is that there are still plenty of foreign nationals who are willing to live in this country and contribute to its economy. I am one of them, but I’m not sure how long America will stay as attractive as a golden mountain of opportunity and freedom. A lot of graduate students my age that come from China these days are going back to China after they graduate because they believe that China has more opportunities than America. As the article noted, Williams saw that in China a 28 year old recent graduate was able to get a $5 million research grant from the government for her research, but here in America a professor would have a hard time raising $50,000. Additionally, a major issue preventing foreign talent from staying is the draconian and frankly bizarre immigration system in America. It takes years for a foreign national to win legal rights to stay in this country, and while they wait they are often treated like criminals or indentured servants. For many brilliant young scientists, this crazy immigration system is really not worth the trouble. They can go back to their own countries and have all the rights of a citizen and make a difference for their people, so why should they go through the gauntlet here? This loss of foreign talent is an incredible waste for America because many of these students get fellowships and are trained by American companies and schools, but end up bringing all the things they learned back to their own countries. If the immigration system were easier on talent then I am sure more people will consider staying.

So will Silicon Valley become Detroit? I highly doubt that will happen in this generation because this area is still buzzing with innovation and there are also many immigrants here who have made America their home and they will continue to contribute. I know that there are people who hate us for having these high tech jobs here, but we would not have these jobs if there were enough qualified Americans. I do believe that America has to get serious about education and training in science to stay competitive in the world, and it has to start as soon as possible. I think the $39 billion pledged in the new stimulus package to upgrade schools around the country is a good start, but it is a drop in the bucket compared to the amount of money that went to failed companies recently. Will the American government ever learn to truly invest in the future long term?

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P.S. Happy Chinese New Year everyone!

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Today my hubby finished sorting all the pictures from our trip. He really took a lot of pictures! Since a picture is worth a thousand words, this shall be a photoblog of the ancient and modern that we saw on our trip. Most of these pics were taken by my hubby, but I have permission to use them on my blog.  If you want to use any of these photos please ask me to ask my husband for permission.  Enjoy!

The Ancient:

The Great Wall - Beijing

Tiananmen - Beijing

Temple of Heaven - Beijing (This is probably my favorite structure in Beijing. It is around 600 years old and built without a single nail).

Terra Cotta Army- Xian (They were a lot bigger in size and numbers than I thought. These are around 2000 years old)

Five Pavillion Bridge - Yangzhou (This is the symbol of my hometown Yangzhou. Built in the 1700s by salt merchants on the Slim West Lake)

The Modern:

Bird’s Nest & Water Cube - Beijing (We didn’t get to stop and go into these, but they were quite impressive and looked even better at night)

CCTV tower - Beijing (A really weird looking building)

Runyang Bridge on the Yangtze River - (This bridge connects Yangzhou & Zhengjiang and its southern section is the 4th longest suspension bridge in the world)

Pudong Skyline - Shanghai (These new buildings east of the Huangpu river sprung up in the last 15 years.)

Speed counter of the Shanghai Magnetic Levitation Train (It’s going about 260 miles per hour for you non-metric folks).

There is not much to say besides that you have to see it to believe it all.

To be continued…

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Despite censorship and propaganda, Chinese people are very aware of what is going on in their country and around the world.  Every person I met knew of the financial crisis in America, and even the masseuses knew of Obama and McCain. I’m fairly sure most people here in America have no idea who the Chinese president is. (Funnily enough the Chinese president’s last name is “Hu”).   Here are some of the tidbits I heard about how the financial crisis and other factors are affecting China’s economy and the lives of everyday folks.

First of all, the stock market in China plunged more than 70% from its highs.  The central government called this a correction, but the people I talked are pretty aware that it’s more than that. However, the percentage of people in China with skin in the stock market is very small.  Most people put their money in the four large government capitalized banks and collect interest and many people still have traditional pensions for their retirements. However, orders for Chinese goods are down significantly for next year and many factories are closing down due to lack of sales since the United States is China’s largest trading partner.  Everything from shoes and plastic forks are seeing decreases in orders.  Unemployment is fairly high since China has way too many people.

Another event that affected China’s economy is the Olympics.  In order to ensure that the event was a success with the least amount of restrictions China created new Visa rules to curtail the entry of foreigners.  As a result, the amount of tourists dropped by quite a bit.  Most of these Visa restrictions have been lifted, but the outlook for tourism is still lower than previous years because many foreigners are not travelling in the current economic climate.

The people I spoke to were also quite curious about home and car purchase in America.  Cars carry a tariff as high as 25% to 100% in China, but people still buy them.  Condos in large cities like Beijing and Shanghai are extremely expensive, and yet people still manage to pay in cash or put at least 30% down. The tour guide in Shanghai told us that most people also get very short term mortgages where they pay a home off in 5 years.  She thought that a 0% down loan is absolutely ridiculous and said that the bankers in America must be idiots. Home prices in China hasn’t really fallen because people save up so much cash to buy something, but home sales have slowed significantly after a rapid run in prices.

Most people I spoke to believe that the Chinese government is doing the best it can under the current economic climate.  Everyone agreed that their lives have vastly improved in the last two decades of reform, and even though some people said that they were dubious about China’s large purchase of American government debt, they seem to agree with the fairly conservative economic policies of the central government.  China is also focusing on education and scientific research much more than before to cultivate its own engineering and scientific talent.  Another emerging trend is that more and more Chinese students of my generation who go abroad are returning to China after they graduate.  This is a big difference from my parents’ generation, who went abroad and never returned.

For the most part,it seemed like business as usual in China. In my hometown, the restaurants we went to were packed to the brim and my grandfather said, “I bet you can’t see a financial crisis here.”  There weren’t as many tourists, but I guess that’s better for pictures.  In Shanghai it was hard to hail a cab, and car license plates are auctioned off each month for more than $5000 each.  In Beijing, the construction cranes were still working overtime to erect modern and bizarre skyscrapers.  China is definitely still growing amidst this global financial turmoil, and there is definitely a sense of pride and optimism in the misty polluted air.

To be continued…

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Today I just came back from China after a two week vacation to Beijing, Xian, Shanghai, and Yangzhou.  This was the first time the hubby and I traveled to another country together and it was quite an experience.  It was also the hubby’s first trip to mainland China so he had a few reservations.  For example, he asked me if the hotels were “okay” and if they had hot water. Since I’ve been back to China quite a few times in recent years I assured him that they were quite fine.  He was also afraid that he couldn’t breathe correctly because I told him that the last time I went to Beijing the rain made my sweater dirty.  Surprisingly, this time Beijing was quite clean and the sky was clear and blue.  I think whatever mandates they implemented for the Olympics really worked.  Nevertheless, the hubby thought that the cities all smelled a bit weird.  In his words, “I know the city smells because when I fart I can’t smell it.”

Anyway, here are some of the funnier “Americans in China” moments:

1) We met a lady named Irma from Los Angeles  at the airport who was travelling with her nephew.  She happened to be on the same tour as us.   On the first day of the tour the bus took us close to the Olympic Village in Beijing and as we passed by the Bird’s Nest and Water Cube a Chinese bus slowed down right next to our bus so we were face to face to its passengers.  Irma was so excited that she started to wave frantically at the local Beijing folks in the other bus and took out her camera to take pictures of them.  The people in the other bus were quite amused and also took out their cellphones and cameras to take pictures of her.  The hubby and I were cracking up at this scene because Irma was so excited and yelled “HELLO!!”  After the Chinese people took out their cameras she said, “they must think I’m some crazy American lady!”

2) Our tour took us to the home of a local artist in a “hutong”, which is a word describing the older courtyard style dwellings in Beijing.  One of the ladies asked the artist, “how do you do your laundry?”  The artist answered, “I have a washing machine” in Chinese.  Since I understood Chinese I laughed out loud before the translator translated what the artist said.  Another lady asked, “how come your dogs don’t bark?”  The artist, translator, and tour guide all cracked up at that question and answered, “I don’t really know”.

3)  Many public Chinese restrooms still have “squat holes” where you do your business by pulling down your pants and squating over a deep hole.  Some of these restrooms don’t have doors so you can see people squatting down.  One of the ladies went into one of the restrooms and saw an old lady squatting there and she ran out of there in horror.  Then she told everyone what she saw.  I thought it was pretty funny since those kind of restrooms were pretty standard when I went to elementary school.  They are actually slightly more hygenic since your skin doesn’t touch anything.

4) We also visited a Chinese elementary school.  In Chinese elementary schools you have to do these eye exercises everyday and supposedly they keep your eyes healthy.  So when we visited the school the kids were in the middle of these exercises.  The Americans were quite bewildered and wondered why the kids were rubbing their faces and brows.  I said that they were eye exercises and did a few of them.  The tour guide thought it was pretty funny.

Now, the Chinese also have their quirks that the Americans found funny or crazy.

1)  One guy visited the Beijing Zoo on his own to see the giant pandas.  He said that the Chinese people didn’t care about the pandas, but instead they were crowded around the common squirrels.  He found it funny because we have squirrels running everywhere here in America.

2)  The public parks are filled with people singing songs, playing games, dancing, and practicing Taiji.  My husband asked me, “how come Americans don’t use parks like this?” The tour guide explained that people in China retire much earlier than Americans.  Women generally retire at age 55 and men retire at age 60 so a lot of people have nothing to do but to enjoy themselves.    Chinese people are also very social so they like to get together to play in public places.

3) Chinese people don’t really adhere to traffic laws or stand in line.  The traffic in Beijing was  quite orderly, but once you get to Shanghai, then you’ll see people creating lanes out of nowhere and busses coming dangerously close to crushing other cars.

4)  Some Chinese people have never seen white people before, and some of the people in our group became tourist attractions themselves.  Several people received requests from random Chinese tourists for pictures because they had blue eyes or red hair.  They got quite a kick out of this.

Okay, now onto the most bizarre being we encountered on the trip.

Our group took an overnight train from Beijing to Xian.  Each couple had their own room on the train and the tour guide told us not to open the doors for anyone at night because sometimes there can be thieves on the train.  So everyone went on the train warily that night.  Around 1 am, I got up to use the bathroom while the hubby stood guard by the door.  When I came out of the bathroom a creepy white guy was standing in the hallway blocking my path.  He had very pale skin, beady green eyes and reddish hair.  He stared at me for a couple seconds and I said, “excuse me”, and he let me pass back to my room.  My hubby looked out some more because he thought that guy was quite creepy.  He didn’t want to go to the bathroom while leaving me alone in the room so he waited for the guy to leave.  After ten or fifteen minutes the weird man still didn’t leave so the hubby locked our door and started to press the “Attendant” button.   Suddenly, we started to hear loud pounding on our door and the cabins next to ours.  The man also tried to open several people’s doors.  According to the hubby that man stared him down while I was in the bathroom, and he reeked of alcohol.  The pounding went on for about 10 minutes and we heard some doors opening and random people speaking.  We simply hid in our room and slept until morning.

The next morning, the ladies next to our room started to talk about a “psycho killer” that came knocking in the night.  Apparently, one of the ladies really needed to go to the bathroom so she opened the door and the man stared her down and then stuck his tongue out at her.  The man also peed all over the floor of the bathroom in our traincar.  Another couple apparently didn’t lock the door so he actually got into their room.  The man in that cabin pushed the guy out.  One of the ladies speculated that the man is  a French boozehound, and my hubby and I started  laughing because one of the songs on Rock Band 2 is Psycho Killer by the Talking Heads and that song has French sprinkled throughout.  The hubby also expressed that it was ironic that all of these foreigners were expecting some Chinese thieves, but instead the psycho was not Chinese at all.

Later when we got off the train the hubby really wanted to find the crazy guy and snap a photo of him, but we didn’t see him.  However, a lady in our group spotted him in a group waving a French flag.  This experience certainly brings new meaning to the lyrics “Psycho Killer Qu’est-ce que c’est?”

To be continued!

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