Pete's Comments

10

"The Right to Refuse Service to Anyone"

Well, I always tell my employees who are complaining about one problem or another, that when they're done complaining, they should try to be productive and suggest solutions. I guess that applies to me as well, so in the spirit of trying to be mildly productive and offer helpful ideas, I'll put myself in the shoes of a Chinese policy planner-- please feel free to use this for a separate topic if you want.

I admit that I don't have all the information here and I'd like to have more accurate data. But if I were consulted to draft a population, immigration, development, environment and nutritional policy for China-- which stabilizes population but preserves economic growth and the environment (while encouraging investment from people like us)-- the following 5 ideas are what I would suggest:

1. Instead of the forced One Child Policy, set up voluntary measures to encourage small families instead. Help to improve education throughout the country even in the rural areas, encourage more people to study advanced subjects at university, to become wealthy, to start towns and cities. Better education and economic improvement naturally lead people to have smaller families, down to replacement level stabilization. Furthermore, this would help China to become wealthier with a better-educated population.

2. Invest in pro-environmental technologies like reforestation, renewable energy sources, enriched crops with nutrients (like the "Golden Rice" that has extra Vitamin A), more energy-efficient technologies that require less electricity to deliver higher output, re-utilization of industrial wastes, vaccines and desalination of seawater. Minimize pollution of water sources and reduce the amount of lead in pipes and homes-- which causes intellectual deficits and brain damage in children. The cleaner, less polluted and healthier China is, the more effective the Chinese economy will be. These will help China to have a firm, sustainable industrial economy and help to cushion the effects of rapid economic growth, while increasing health and providing for clean water, air, fruits, vegetables and grains for the population.

3. Provide more incentives for China's vast population of emigrants in the US, Europe and Australia-- including highly educated people who have graduated from top universities-- to return home to China and apply their skills to strengthening China's economy. Many of the "sea turtles" have been returning, but far too few. China has been losing too many of its best-educated and most capable young people abroad, and this, again, discourages us foreign investors from putting money into China. However, if more of these overseas Chinese are lured back in-- with e.g. offers for nice jobs with high pay, their own labs and start-up capital for companies-- then they'll boost China's economy tremendously, boost up creativity, help initiate Nobel Prize-winning work and innovative projects, and other big benefits. This sort of thing further helps to stabilize China's population in the best way, while maintaining strong economic growth.

4. Encourage educated Westerners-- as well as 2nd-generation and 3rd-generation Chinese and other Asian immigrants in the USA, Europe and Australia-- to work or even settle in China. Help to spread Chinese language education at Western universities and provide overseas scholarships to talented Westerners to study and work in Chinese schools and companies, especially if they're familiar with Mandarin. Again, this sort of thing can help to bring in further talent to help solve Chinese ecological and demographic problems more effectively.

5. Finally, and also very important-- try to provide incentives and rewards for immigration of skilled workers from elsewhere in Asia to study, train, work, settle and start families in China, and assume Chinese citizenship. In particular, developing countries like Vietnam, the Philippines, Thailand, South Korea, Laos, Cambodia, Indonesia and Burma have an enormous skilled talent pool that likes to go abroad for further education or even immigration, but current Chinese laws bar these skilled people from studying and working in China, where they could be a tremendous resource for the Chinese economy and their own. Vietnamese engineers, Filipino nurses and doctors, Thai businesspeople, Korean scientists, Burmese metalworkers-- I've met these people and lots would like to work in China, but because of Chinese immigration restrictions, they can't enter China or gain Chinese citizenship, so they go to Western countries in place of China. This is a tremendous loss of talent and human capital for the Chinese economy, which should instead be attracting such people.

Instead, China should open up its immigration laws to skilled workers from other Asian countries, who could meet shortages in the Chinese economy while getting extra training in Chinese universities and businesses. Obviously, China would also benefit from further encouraging Chinese language acquisition in these countries. In turn, these migrants from elsewhere in Asia would help their home countries by sending remittances back home, while using their extra training and returning home (in some cases) or staying in China and helping to foster business partnerships between China and their home countries.

I've read some other ideas like this, e.g. a "responsible family initiative" that's been floating around, but I think this sort of a proposal helps to both stabilize population and maximize economic growth while protecting the environment, health and nutrition for the people. Again, I'm just a guy with my own partial information set here, but I genuinely admire China and would like the country to succeed-- both for the country's own sake and as a potential market for foreign investment. China could really become a model country, an example of how to grow and develop successfully, and hopefully some of my own suggestions might prove helpful for this.

Posted by Pete at 2006-06-19 16:47:21. More

9

"The Right to Refuse Service to Anyone"

Jian Shuo Wang,

OK, now I'm *really* worried. A friend sent me a link that further talks about some concerning things regarding China's One Child Policy, from a business perspective:

http://tinyurl.com/kq838

Look, this is very serious, and I'd like to have more solid, knowledgeable, accurate information on this. I don't know whether this article is right or wrong, but if it's true, then the One Child Policy-- if it continues for several more years-- is going to be doing tremendous damage to China's economy within about 15-20 years, and if true, then I and thousands of my business colleagues are not going to be investing in China. We'll be putting our money into places like India and Vietnam instead. I actually think the One Child Policy was a smart idea for China for a while, as it slowed population growth and probably helped China's environment and urban planning to proceed at a more manageable pace back in the 1980's. But it's not supposed to be a permanent policy, and if this article is correct, then the Policy is doing more harm than good.

As Shrek7 was pointing out, it takes years-- in fact, often more than a decade-- for a business, especially if invested in a foreign country, to become profitable. For us to feel confident about investing in China, we have to feel confident about the economy's long-term prospects there, and if the One Child Policy continues, we're not going to have that confidence. Again, I'm still not sure how accurate that article is, but if it is accurate about the effects of the Policy, there are three big concerns that we as foreign investors in China have to worry about:

1. The elderly-to-worker dependency ratio. China and all other countries do have to stabilize their population, for the sake of the world environment, we understand that. But when stabilizing a large population, the best way to do it is similar to the best way that you stop a car in a snowstorm, if it's skidding on ice on the road-- you do it gradually so that you come to a smooth stop and then keep moving on the road. If you slam the brakes on too fast, then you skid like crazy and flip over, off the road.

We're worried that with the One Child Policy, China has slammed the brakes on too fast, with China's population aging faster than any other in history. The One Child Policy focuses too much on sheer numbers and not enough on the population and age distribution-- you need to have a reasonable number of young workers, and not too great an excess of retired elderly. I realize that China can do things like raising the retirement age (to, e.g., 72 or so) and encourage people to work longer while they're healthy before receiving pensions, also helping elderly people to stay healthy and productive, but you still need a decent ratio of young workers to have a good economy. As the economy and education improve, people prefer small families and the population stabilizes gradually, anyway.

If the One Child Policy has indeed sent the Chinese birth rate plummeting to 1.6 or 1.7 suddenly and creating a vast excess of elderly, then this is obviously not a formula for a healthy economy-- if China is filled with hundreds of millions more retired elderly than young workers, then the country's savings would be depleted and business would grind to a halt. As businesses especially in the retail sector (dependent on consumer savings and spending), we're not going to invest our money into such a country.

2. The male:female ratio. This article and others, are implying that in much of China, the male:female ratio at birth has hit something like *130:100* due to the One-Child Policy. For rural families especially, if they're forced to have only one child, then they'll want a boy to help out on the farm-- whereas if they can have more children, they don't worry about this so much since they'll have roughly equal numbers of boys and girls.

If true, this is unacceptable and it could be disastrous for China in about a generation, and we won't invest our money there. Societies in history with large excesses of men or women have almost always been politically and economically unstable-- you really need to have a roughly 50:50 ratio of each sex. Otherwise, China in 15 years for example, might be having a massive excess of young men to young women, with the result being that hundreds of millions of young Chinese men wind up not being able to find a woman to marry. Societies like this almost always have massive social problems when they have millions of embittered young men without partners-- higher crime, increased warlike tendencies, depression, generalized social dysfunction. I realize that people can partially make up for the imbalance by e.g. importing brides from places like Vietnam, the Philippines or Korea, but this is a very limited solution. A society with this sex imbalance is probably not stable, and it's not a good place to invest our money.

3. The differential birth rate problem. The consultant warned us that Xinjiang is a "demographic and political time bomb" since the Han Chinese are subject to the One Child Policy while the Muslim Uyghurs are not. So the Han have only one child per couple, while the Muslims have 5 or 6. I once read an article on this and history has shown how dangerous it is. Serbia lost Kosovo because the Serbs were having only one child while the Albanian Muslims were having 7-8 kids per couple. Shiite Muslims have a much higher birth rate than other groups in Lebanon which has made them close to a majority. The US Southwest is re-acquiring its Mexican and Latino culture and character since Latinos have a much higher birth rate than whites. (Southwestern states like California, Arizona and Texas were actually part of Mexico for many centuries, but the US invaded Mexico in the US-Mexican War and seized half of Mexico's territory in 1848, which is why those territories are now part of the US.)

With the selective One-Child Policy, according to this consultant, China is producing its own Kosovo in Xinjiang. It would be a much better idea to have a uniform policy for everyone, also try and integrate more Uyghurs into the larger economy and make them less reliant on agriculture, help them find good jobs both within and outside of Xinjiang, and so on.

The result? If these articles and the consultant's warnings are true, then the One Child Policy, if continued for several more years, is forcing China into a massive demographic, economic and political crisis in a few decades, and we're not going to invest our money there. We'll put our money into places like India instead.

Notice that this has absolutely nothing to do with the numbers of English-speakers that India has. English proficiency is by far the single most overrated and useless factor in attracting foreign investment. As retailers especially, we couldn't care less whether workers in India or China become fluent in English or French or German or whatever-- obviously, we'd be hiring mostly among the local people, and we'd be selling our products to them in the local languages and dialects, whether Mandarin in China or Hindi, Bengali, Tamil or the other local languages in India. Training more English-speakers in China would do absolutely nothing to help increase confidence among us foreign investors.

On the other hand, we do care a lot about demographics in China over the next 20-30 years, and India, for all its flaws, has much better demographics than China, if these articles are true. India's population growth is also slowing rapidly, but at a more gradual pace overall than China, and it's due to voluntary measures-- like better education and availability of contraceptives-- in India, rather than forced measures like the One Child Policy, which don't necessarily help to increase wealth but force population growth down too fast. Thus, India is starting to look like a better place for us to invest our money in the coming decades, unless China soon changes the One Child Policy.

It's funny, because as I've been writing this, another old friend of mine has written to suggest that the articles on the One Child Policy *are* flawed. He's confirming my initial hunches-- that the Policy really doesn't apply much to rural regions, that the Policy is not really enforced much, that wealthy urban couples just pay the fine and have 2-3 kids if they want, that people just hide their kids or migrate if they have e.g. 5 or 6 in the countryside. He also says that China's true fertility rate is much higher than the official figures since the official numbers underestimate it-- rather than 1.6-1.7, it's more like a little above 2.1, at replacement levels. If he's right, then maybe things are OK. But I admit, I'm frankly confused right now. And the truth is, most of my business colleagues have been hearing the very scary things about the One Child Policy from the consultants and the articles, and if the One Child Policy goes on for a couple more years, they're going to lose confidence in China and invest their money elsewhere.

Please don't ignore this post, please don't shuffle it around or disregard this issue as unimportant and talk about trivial things. We're talking about hundreds of billions of dollars (or Euros) in investment here from US and European companies. We'd like to invest a lot of it in China, but the One Child Policy is making us nervous. Honestly, a lot of us are confused and we hear a lot of contradictory information. How does the policy actually work? Can you chart out myths and truths about it? If the One Child Policy has forced fertility down too rapidly and caused China's population to age too fast-- which would be a very bad thing, as I explained above-- are the Chinese authorities in the process of changing and loosening the policy, to encourage voluntary small families (and better economic growth and infrastructure improvement) instead? I'd greatly appreciate clarification here.

Posted by Pete at 2006-06-19 16:36:18. More

8

"The Right to Refuse Service to Anyone"

Also-- Jian Shuo Wang, this is a little off-topic but I had a question myself. I was at a business conference recently where an international consultant was speaking-- he's one of these people that gives advice to American businesses, on where to invest abroad.

Anyway, he said something that shocked me quite a bit. Many of us have been planning investment in China for a while, but this consultant-- who used to be a Chinese investor himself-- is now advising all of us to avoid investing in China and to focus instead on Latin America, India and Vietnam. The reason for his advice, he stated, is China's One Child Policy-- he said China should get rid of it immediately, within maybe two years, or the investment consultants in the USA are going to recommend that US companies pull all their money out of China.

I don't know whether he's right or wrong, but he's a very important and respected retail business consultant, and he said that China now has the world's worst demographics, possibly the worst in history, due to the One Child Policy. He said the policy has caused China's birth rate to plummet rapidly to about 1.6, way below replacement level very suddenly, causing a rapidly aging population with too few young workers to support the senior citizens. In fact, he said China is getting old before getting rich, thus getting old faster than any other country in history. He also said the problem's even worse since some minorities in China (like the Muslim Uighurs if I recall correctly) do not have to worry about the Policy, only the ethnic Chinese, so the Muslim population in China rises rapidly while the Chinese fall in population, leading to further ethnic conflict. Moreover, he said that due to One Child Policy, China now has a massive excess of boys to girls, which can lead to wars in later decades. He said that due to the One Child Policy, China will probably suffer a massive economic collapse by about the year 2025.

He said that China should instead focus on better education and health care, which would naturally reduce birth rate while improving the Chinese economy, while discontinuing the One Child Policy. He said Chinese population should stabilize gradually to replacement, not fall rapidly like this.

Now, I'm raising this issue, because frankly, I don't know whether he's right or not. I always thought the China One Child Policy was applied only in the big cities like Shanghai, not in the countryside, so people in rural and suburban China, and in the small cities, can still have large families with many kids. Also, I thought people who wanted more than one child could easily overcome the policy, just pay a small fine or hide their kids or something. In other words, I thought China still had a relatively high birth rate.

But now, this consultant has gotten me concerned. I myself have been planning to invest about $10 million in China, and my fellow businessmen at the conference wanted to invest as well, so this is possibly $1 billion that we're planning to invest in China, but now we're unsure whether to do it. Honestly, if that consultant is correct, then we're not going to invest in China. But, I'm not sure if he is correct.

This is your chance to prove him wrong. If I don't hear any refutations of that consultant, then I'm changing my plans, and I won't be investing in China. But if you can convince me he's wrong or that the One Child Policy is changing, then I'll put my money back into the Chinese retail market. I just need better information, and I figured that you might know something.

Posted by Pete at 2006-06-18 21:01:26. More

7

"The Right to Refuse Service to Anyone"

"There is a heated dispute going on right now over a sign at Geno's Italian restaurant in Philadelphia"

I've been following this myself as a business owner, and it's just plain stupid what Geno's is doing here. He's losing a ridiculous amount of business to competitors, not just Hispanics but also many whites and blacks who really don't care for such controversy and just want to go somewhere to eat. There may be some Ku Klux Klan blowhards who show up for a while to support the restaurant, but over the long term, Geno's has permanently lost an enormous amount of business.

When I hire people for my retail shops, job applicants who can speak Spanish have a big advantage in getting the jobs. In fact, for the 17 recent job positions for which I was hiring, 14 of the new hires were able to speak Spanish-- including the most high-paying positions like managers and buyers-- while the other 3 are in the process of learning Spanish themselves. I'm doing this for basic business survival, not as any political statement-- so much of our customer base is Spanish-speaking that, if we don't have Spanish-speaking employees and Spanish labels in our stores, then those customers will go somewhere else that does have them, and we'll go out of business. In fact, about 40% of the retail shops in my area have recently gone out of business, and the vast majority of them were English-only in their employees and signs. They didn't survive. In contrast, the businesses that provided Spanish services are now thriving. Note also, that I'm in the Midwestern US mostly in Illinois, Indiana and Kentucky, yet Spanish is crucial here. For companies in the Southwestern states, New York, Florida, New England and New Jersey, you absolutely have to have Spanish or you won't survive. Even lawyers at law firms and doctors at hospitals are needing fluent Spanish to get hired.

Posted by Pete at 2006-06-18 20:47:33. More