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Saturday, July 29, 2006

The Chinese Juggernaut

Days after my return from the US, I was on a brief trip to Beijing, China last few days and just returned back home. The city of Beijing was full of fog - almost dark throughout the day. Beijing is splurging – the development of Beijing continues to proceed at a rapid pace, cranes are booming everywhere in preparation for the 2008 olympics. I contrast that with the slow growth that I see in India. The IT industry is just beginning to grow there. As I met with a cross section of people – Global IT giants, business majors etc- I understood that, and the vast expansion of Beijing has created a multitude of problems for the city – home to some 16 million people. Frequent "power-saving" programs have been put in place by the government. Beijing residents and regular visitors often complain about the quality and cost of the basic utility services – water , electricity & natural gas. Efforts to control the smog include the government ordering industries to control pollution and leave the Beijing area in an effort to control the smog that covers the city. Morgan Stanley’s Andy Xie thinks that
china’s environment catastrophe is poorly understood. He points out that if the relocated factries had to subscribe to the same environmental standards as in the OECD countries, goods made in china may not be that cheap and adds that the lesser costs for pollution have been important than cheap labour in the deflationary pressure from china. While it was frustrating to see that blog domains are blocked from within the country, I must say that the progress in Beijing(an old city in some ways and very different from the Chinese chow case city of Shanghai) is indeed amazing. Not to forgot the shopping that one can do in the backyard of the world's factory.

That’ why it is interesting to see what china watchers have to say about the progress made by the nation.Jim Jubak writes that the imminent downturn in china could hurt global economy significantly. As he sees it, post the Olympics boom, The Beijing government has prepared for a rise in bad loans as a result of an economic downturn by selling off stakes in the country's biggest banks to overseas investors. The government has guaranteed that some of the world's deepest financial pockets will be available to bail out China's banks in the next crisis. He adds that china produces an impressive 600,000 university-trained engineers annually. But thanks to an educational system that stresses rote and memorization, McKinsey calculates that only about one-third of those engineers have the skill level demanded of an engineer by a global economy. An underemployed and dissatisfied class of university graduates is far more of a threat to the government of a developing country than unrest among the peasants.Read his article here. As I see it, besides influencing the global economy in a significant way, the truth is that millions and millions of people have gotten to lead a better life and more and more are becoming prosperous.

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