China, India Solar Power and Good News

We are amused when people trumpet hardline positions such as “I hate cats,” (fine, don’t get one), “Star Wars is better than Star Trek,” (don’t watch it) or “Rhianna is better than Beyoncé”–(hey, wait a minute!) We are also amused when politicians have to walk back tough stances. So imagine our glee at the President of Iceland’s remarks “that he’d ban putting pineapple on pizza if only he had the power to make laws” only to have to walk it back a few days later after an outcry on social media (is there any other kind of cry on social media?). On his Facebook page, the President recanted: “I like pineapples, just not on pizza. I do not have the power to make laws which forbid people to put pineapples on their pizza. I am glad that I do not hold such power.” While we ponder whether this was actually a clever Icelandic attack on the U.S. political situation, we bring you China in all its connectedness, India in all its solar power and the world in all its better, improved ways. It’s this week’s International Need to Know, putting our pineapples wherever we darn well please (but not on pizza) while bringing you the world in all its strange and wondrous ways.

Without further ado, here’s what you need to know.

All the Pieces Matter in China>

We present three bits of data and news from China that are actually connected in one way or another. As the great (greatest?) TV show, The Wire, used to say, all the pieces matter. First, is a perhaps weak piece of data but interesting nonetheless. Three economics professors walk into a bar and create an Economic Uncertainty Index  for China (more next week on their global uncertainty work). It’s based on the frequency of articles about policy-related economic uncertainty in the South China Morning Post (SCMP). As you see below, the index leaped up the last few months, apparently because of a certain loud U.S. president and a rise in worldwide protectionism talk that could damper China’s export economy. But, fortunately China is trying to transform to a domestic consumption driven economy. Yes, but the Shanghai Daily reports that “China’s expenditure on fast moving consumer goods in 2016 grew 2.9 percent, marking the slowest growth in the last decade and also a further slowdown from a 3.5 percent growth a year ago.” Finally we reported earlier this year that Chinese are trying to get their money outside of the country and using Bitcoin as one avenue, but that the Chinese government was trying to curtail this. We noted that is easier said than done. Sure enough, Quartz reports that peer-to-peer marketplaces are picking up the slack, particularly LocalBitcoins: “Yuan volumes on the marketplace have exploded in the past week. Trading on LocalBitcoins currently accounts for about 6% of the total trading volume in yuan, according to data source Crypto Compare. China is complicated. Not even McNulty and Bunk could crack it.

 
  

Solar Continues to Stalk the World

We told you of the continued advances of solar in China last month but don’t forget about India. The second largest country in the world is now the third-largest solar generator. Yes, India is now behind only China and the U.S. for solar generation. And it aims to generate much more in the future with a goal of 100 GW by 2022. Transforming to solar generation is important because India now has some of the most polluted cities in the world, more polluted than China’s. More solar generation is possible because of the continued fall in prices and increase in efficiency of solar power. Rooftop solar system costs, for example, have fallen 12% per year since at least 2012. Of course, it’s not just clean energy that India needs since 400 million people in India have no electricity at all. But, India has a “Power for All” program that aims to provide electricity to everyone in the country by 2019. That’s an ambitious target and we’ll be surprised if it’s met. But we aren’t surprised that solar is playing a larger role and India’s solar advances provide more evidence that regardless of changes in U.S. energy and climate change policies, Moore’s Law of solar will prevail.

  

The Continuing Case for Good Times

In our continuing effort to remind you that despite the dark clouds forming, despite the loud clamoring of doom and gloom, we live in the most peaceful and prosperous time in history, we point you to the graph below. It shows the rapid decrease in the number of deaths worldwide of children under five years of age. In 1990, 12.1 million children under the age of five died around the world. In 2015, less than half that number of young children died, 5.8 million. As financial advisors like to say, past performance is no guarantee of future results but it’s important to recognize we have been in a boom time for humans. Let’s hope it was not a bubble.

 
  

Myth of Chinese Nationalism, More Trouble in Greece & Drone Flying Cars

There have been many great clutch performances in history. Michael Jordan’s push-off shot against the Utah Jazz to win a sixth NBA Championship, Edgar Martinez’s double down the line to send the Seattle Mariners to the American League Championship and the clutch in my 1987 Toyota Corolla not giving out until we exited I-95 some 20 years ago. But while watching the Grammy’s earlier this week when Adele flubbed the beginning of her tribute to George Michael we were reminded of the greatest clutch performance in history–Jennifer Hudson singing “I Will Always Love You” at the  2012 Grammy’s. Remember the circumstances: Whitney Houston had died less than 24 hours earlier. She was one of Hudson’s idols. The Grammys are watched by millions of people around the world. In a few short hours Jennifer Hudson with no prior warning had to prepare to sing an iconic song by an iconic singer–and she killed it. Completely. The greatest clutch performance in history. So we try not to fumble when telling you about the myth of Chinese nationalism, remind you of the continued troubles in Greece and announce the first operational drone flying car. It’s this week’s International Need to Know, not taking orders from Russia or anywhere else as we tell the story of our mixed-up, muddled world.

Without further ado, here’s what you need to know.

The Myth of Chinese Nationalism?

In a time of apparent increasing nationalism in Europe, the U.S. and other regions, the Chinese apparently didn’t get the memo. No, not the government which certainly has nationalistic tendencies, but the people themselves. Foreign Policy magazine points to a new paper by Alastair Iain Johnston, a professor at Harvard (with his name it was either Harvard or Cambridge, possibly Oxford, maybe, just maybe Ball State) that shows Chinese, especially Chinese youth, are becoming less nationalistic. Since 2002, Johnston, in partnership with Peking University, has been conducting surveys asking questions such as “Would you prefer to be a citizen of China?” and “Is China a better country than most?” The number of people responding yes to those two questions and others has actually declined between 2002 and 2015, suggesting a less nationalist bent. This is especially true of younger Chinese, “In each instance of the survey since 2002, respondents born after 1978 were markedly less likely to ‘strongly agree’ with any of the nationalist survey prompts than were their older peers. Perhaps most striking, by 2015, the proportion of older Chinese strongly agreeing to support their country ‘even when it is wrong’ was more than twice the proportion of youth who felt that way.” As always, the world is more complicated than we realize.

 
    

Among your worries, keep worrying about Greece

That kit bag* you keep your worries in? You’ve probably ordered a new one off of Jet.com or Amazon what with all that has been going on lately. But don’t forget to save a large compartment for Greece, which though it hasn’t been in the news much lately, continues to be in a lot of trouble. The IMF recently called Greece’s debt “explosive” and “highly unsustainable” (adding the word “highly” in there is in this case not gratuitous). Greece’s debt to GDP ratio has increased from 159% to 183%. The IMF, of course, believes the only realistic solution going forward is debt relief. Germany, however wants continued austerity. And given upcoming German elections it is not realistic that they will change their tune on this issue. But, it’s also not realistic that Greece will need only one more bailout and then all will be good.  This can is already at the end of the street. One more kick brings it to the corner. What’s around it?

*World War I allusions are all the rage nowadays and who are we to buck the trend?

      

Drone Flying Cars

There are many things we all need to know this week but none more important than the drone flying car being tested in Dubai that according to Popular Mechanics will start carrying passengers this summer. When you say “drone flying cars” we check our Straddle Bus skepticism at the door and are all in. The drone, the Chinese-made EHang 184, can carry a passenger weighing 220 pounds plus a small bag. According to Popular Mechanics, “After buckling into its race-car-style seat, the craft’s sole passenger selects a destination on a touch-screen pad in front of the seat and the drone flies there automatically.” We, of course, point you to video of the drone which has a half-hour of flying time and a range of 31 miles. So make sure when you punch in your destination, it’s not too far away. We await possible debunking and technical problems, but in the meantime–go to Dubai and get in your drone flying car!


Manufacturing Locations, Executives Views of China and Views on Immigration

The worldwide INTN headquarters is home to two cats, one of whom, Willow, has recently been treated for hyperthyroid disease. The treatment consisted of injecting her with low doses of radiation. This meant for the last two weeks we were not allowed to be closer than a foot to poor Willow for more than one hour per day to avoid becoming over radiated. We originally got cats because we were told they are solitary creatures and so our not being home a lot would be acceptable. We were misinformed. They generally follow us around from room to room and constantly want to be petted and when appropriate (which is often) fed. In fact, as I typed that sentence, our other cat, Putter, leapt onto the desk and waltzed in front of the screen, annoyed that I was paying attention to you all instead of him. So although our words may contain an extra radioactive glow to them this week, they also describe where manufacturing will locate in the future, what executives think will happen in China and what people around the world think is important for immigrants to do. It’s this week’s International Need to Know, the Schrodinger Cat of important international information, both alive and dead at the same time (nothing goes over better than a quantum mechanics joke).

Without further ado, here’s what you need to know.

Where Will Manufacturing Go?

Notwithstanding that all countries are likely to have fewer manufacturing jobs in the future, where will be the top centers of manufacturing in the coming years? Deloitte asked the question of manufacturing executives under the assumption that if anyone would know, these folks would.* It is no surprise that these executives rate China first for manufacturing competitiveness in the current year. But, perhaps, surprisingly, they believe by 2020 China will fall to number two behind the United States (this survey was taken before the U.S. election, btw, so current Trump Administration actions had no effect on these rankings). China slips because of its rising wages and a perception that the U.S. is well ahead of China in advanced manufacturing technologies. Overall, North America and Asia dominate the rankings with only the UK and Germany making the top ten. Perhaps the other headline lurking in the list is the executives’ expectation that India will rise to number five by 2020. We find this a rather bold and intriguing prediction. India’s continued economic rise would have implications far beyond manufacturing.

 
*As of yet, we take no position on whether this is a good assumption or not. Ask us again in 2020.
  

Speaking of China, Executives and Manufacturing

We don’t mean for this week’s edition to mirror the Trump Cabinet–full of business executives–but AmCham China also surveyed this prized and interesting species–this time ones in China, and it too provides much grist for the INTN mill. They quizzed the execs on a variety of issues for their 2017 Business Climate Survey. For the second year in a row, 25% of respondents to the survey reported they have moved operations out of China in the last three years or are planning to do so. And as we pointed out in this space recently, even as the U.S. pulls back from its world leadership role, China is a square peg for the round hole role of global leadership. According to the Survey, “More companies are slowing investments and deprioritizing China as an investment destination due to slowing growth and increased concerns over barriers to market entry, the regulatory environment, and rising costs.” Further, “Eight in 10 say they feel foreign companies are less welcome in China than in the past, and more than 60% have little or no confidence that the government is committed to opening China’s markets further in the next three years.”  It’s hard to see China as a leader on free trade when it has so many barriers to entry of its own. But, I guess that’s the world we’re living in now.

  

This is Us

Unless you’re the Atlanta Falcons offensive coordinator and completely unaware of what is going on around you, then you have probably noticed that immigration has been in the news lately. So has the Pew Research Center which has a timely survey on national identity. It turns out that in many countries most people don’t view where a person was born as providing their national identity. Pew notes that “Only 13% of Australians, 21% of Canadians, 32% of Americans and a median of 33% of Europeans believe that it is very important for a person to be born in their country in order to be considered a true national.” You’ll see in the chart below that a few populations put a premium on where a person is born, such as those in Japan (no surprise), Hungary and Greece. Learning the national language is a bigger deal: “Majorities in every country surveyed say it is very important to speak the dominant language to be considered truly a national of that land. This includes a median of 77% in Europe and majorities in Japan (70%), the U.S. (70%), Australia (69%) and Canada (59%).” So, go ahead and move to another country, but learn the darn language, I guess. Of course, with computers getting better and better at language translation, perhaps that will become a lesser issue in the future.

  

Ecommerce Sales, Imports Helping Exports and Immigrants Starting Companies

There are times when we realize it is important to take a strong and clear stance. We know sometimes expressing an opinion can be controversial, and indeed could cost us readers and even in some cases respect. But in light of the news this week*, we are compelled to tell you that we prefer Rhianna over Beyonce. We enjoy her music more, can hear the melody better and find her economy of lyrics more powerful and clear. This is not to besmirch Beyoncé whom we also enjoy, but if gun to head and told to pick one over the other, the choice is easy for us: Rhianna wins every time. So as we cue up Anti on our streaming service, we bring you information on worldwide ecommerce sales, examine the use of imports in exports and discover the role immigrants play in start ups. It’s this week’s International Need to Know, serving up international information in three part harmonies.

*Beyoncé’s having twins!  Bah, Rhianna, if she was pregnant, would have triplets

Without further ado, here’s what you need to know.

Breaking the Mortar Worldwide

Last year we happened to be riding by a Sears store on our bike and decided to stop in to see if they had a certain tool we were looking for and needed that afternoon. The building was as barren as inauguration day. We finally found one lone employee, on the phone, looking like an extra from The Walking Dead. Not only did the store not have the tool, the employee told me most stuff was on their website not in the stores. Indeed the store was nearly completely empty, not just of customers but also of employees and merchandise. When we met with someone from a large department store recently, they told us they weren’t worried about Macy’s, their concern was Amazon and Jet. This is not just a U.S. phenomenon. It’s global. Retail ecommerce sales worldwide increased 22.2% in 2014, 20.9% in 2015 and last year increased 18.6%. China has the largest volume of ecommerce retail sales (see chart below), followed by the U.S., UK and Japan. Ecommerce is still a minority of retail sales (less than 10%) which raises two questions: a) for how long will it be the minority and b) just how large is the opportunity for ecommerce around the world?  

 
  

It takes a village…in many countries

Lost too often in the debate on border tariffs, mercantilism, European intra-trade issues, immigrants and more, is that complicated products and services are composed of inputs from many countries. What is an American car or a Japanese car or a German car nowadays? A Toyota assembled in Tennessee* may be made in America but parts are sourced from many different countries. The engine may be manufactured in Japan and the axle somewhere else. This is true for almost every complicated product. In researching counterfeit goods (more perhaps on this in a future issue), we came across this interesting graph below from the OECD. The OECD report noted that “more than half of the world’s manufactured imports are intermediate goods.” The data is a bit old from 2009 but I doubt things have changed much in the last eight years. Perhaps this will change going forward with 3-D manufacturing and other technological and trade trends but for now the truth of trade is more complicated than our overlords admit or realize.

*A Toyota Assembled in Tennessee is the title of our next country song

  

Immigrants and Start Ups

We remember hearing the statistic while visiting Silicon Valley a few years ago that half of the companies there were either founded or headed up by people who were foreign born. As the new administration enacts and proposes new immigration rules, it’s worth remembering that nationwide this is true too.  According to the National Foundation for American Policy, “51 percent, or 44 out of 87, of the country’s $1 billion startup companies had at least one immigrant founder.” Further, the National Venture Capital Association found that “33 percent of U.S. venture-backed companies that became publicly traded between 2006 and 2012” were started by immigrants. The world’s people have made America successful.