EU and China, Insecure China’s Security, Taking China’s Measure

This week we present one of our periodic China editions–three stories focusing on that wonderful, ever changing, fantastically complicated, increasingly important giant of a country. But before we dive into China, we pause to admire the ever fascinating Japan. We’ve noted more than once that Japan has perhaps the most unique culture in the world which we both admire and at the same time recognize can be troublesome. But today we are in the marveling camp catching up on the recent Japanese foil polishing craze. It turns out a Japanese jeweler took a balled up piece of foil—yes the material you use to wrap up leftovers, barbecue corn on the cob, and if of a certain odd bent, use to make hats—and spent an inordinate amount of time polishing the foil to transform it into the shining ball of perfection you see in the before and after photos below. Apparently this led to innumerable Japanese also spending inordinate amounts of time doing the same thing and posting their photos to social media. We need to make this craze take off in Russia, a far better use of their time on social media platforms than what they are currently doing. As we hire Ukrainian programmers to make it happen, we examine the EU and China, analyze China’s fixation on security and enjoy their playfulness with data. It’s this week’s International Need to Know, wishing we were at the opening weekend of Jazz Fest even as we serve beignets of international information and data.

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

EU and China

Here in America people concentrate on U.S. disagreements with China and the tariff tit for tat. But the EU has its own concerns with China and not enough attention has been focused on those issues, including a recent report signed by 27 of 28 EU Ambassadors to China criticizing China’s One Belt One Road Initiative (guesses anyone on the lone EU holdout? Hungary, which perhaps not coincidentally has recently fallen out of bed with democracy). The report signed by the Ambassadors states the China initiative “runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.” Remember that One Belt One Road is China’s ambitious initiative to build up infrastructure, trade routes and relations through a sort of new Silk Road route, encompassing 65 countries. It is unclear how much China is really spending on the project and how ambitious it will end up being. But Europeans want a piece of the public projects that are up for grabs, they want their companies to have the chance to build the infrastructure envisioned in One Belt. Of all the things to complain about China, this would not be at the top of our list. However, the linked article also includes a fascinating quote by the CEO of Siemens, “China’s One Belt One Road will be the new World Trade Organization (WTO) whether we like it or not.” We wonder whether that is true and One Belt One Road will be every bit as successful as the WTO which is to say not very successful at all—but perhaps that’s not what the CEO of Siemens means? Nonetheless, as China continues to stride more strongly into the world, as an emerged power is apt to do, they are likely to find the world stage every bit as complicated to navigate as its many predecessors in history found it to be.

Insecure China’s Security

Even as China is more assertive outside its borders it is apparently more insecure within them. Or at least that’s one way to read its increasing control of the Internet, its crackdown on dissidents and its institution of facial and even gait recognition technology in its cities. Yes, you read that last item correctly. China has developed technology to identify you by the way you walk, even those more normal gaited than John Cleese. Or as Biometricupdate.com writes, “The technology can also identify a person without their active cooperation. Even if they walk past the surveillance camera hiding their face, the gait recognition algorithm can still unveil their identity.” China is increasingly at the forefront of identity recognition technology, all used in the effort “to prevent crime.” Of course, such technology is also being developed in other countries, including in the U.S. The hubbub over Facebook last month elevated privacy issues. Essentially there is no privacy anymore. David Brin’s now twenty-year-old book The Transparent Society predicted and welcomed the coming lack of privacy. We feel we are walking–and the government will recognize our gait–into uncertain times.

Taking China’s Measure

As we have noted over the years, one of the big challenges with China is measuring it. Economic data in China is much like an old man recounting his youthful romantic exploits—he inevitably stretches the truth and obscures it at the same time. This week China began releasing monthly jobless numbers based on surveys, a data point most other countries provide but China has avoided. Previously China published a “quarterly registered jobless rate”, which like GDP numbers is strangely always the same. Or as the South China Morning Post wrote, “This was laid bare when exporters in the coastal areas were hit by the global financial crisis in 2008, and some 20 million migrant workers found themselves out of a job. The registered jobless rate stayed much the same because it does not include the country’s 270 million migrant workers.” Of course, the new jobless number—5.1 percent at the end of March—could also be manipulated and be eerily consistent through thick and thin of economic cycles.  Admire, for example, the graph below of China GDP since 2015. If your golf game was as consistent as those numbers, Tiger Woods and Jordan Spieth would bow down to you (Patrick Reed–winner of this year’s Masters–apparently would not). Presumably China’s leaders know the real numbers and maybe that’s all that is necessary. Of course, as we pointed out last year, satellite data seems to indicate China’s GDP is doing better than official numbers. Perhaps it would be to China’s advantage to be more transparent.

Globalization More Than Trade, Poor Venezuela, China Driving EV

Years ago we were traveling overseas, Asia perhaps, though we don’t remember exactly where. We were looking at some postcards, when such communication beasts still existed. We saw one with a naked large man sitting on an enormous turtle. We bought it with the idea of mailing it to two friends who worked in the White House for the First Lady, a sort of experiment on whether a postcard with a naked man sitting on a turtle would make it through the White House gates. It did. Our two friends, we were told later, were standing in their office, trying to decipher my handwriting on the postcard (I have the world’s worst handwriting–not third or fourth worst, but the actual worst in the world), and chuckling at my postcard when the First Lady walked in and asked what they were reading. They showed her, and she laughed. And if memory serves, commented on my horrible handwriting. We cannot claim many things in this world, but we can say that Barbara Bush laughed at our postcard. RIP Mrs. Bush while we show how globalization is more than trade, lament that everyone in Venezuela is poor and chart the rise of EVs. It’s this week’s International Need to Know, denying that we are Michael Cohen’s fourth client even as we undress all the secrets of our world.

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

Globalization is More than Trade

We noted two years ago that international trade no longer grows as fast as GDP around the world. That does not necessarily mean that globalization is slowing down. Case in point is that housing prices in cities around the world are increasingly synchronized, at least in the largest, most prominent ones. As the IMF puts it, “for home prices in London, check the Tokyo listings.” The IMF recently presented data that shows “In recent decades, house prices around the world have shown a growing tendency to move in the same direction at the same time.” The IMF’s explanation for this new phenomenon (one we’ve noticed anecdotally in our own town with more and more international buyers of houses here in Seattle) includes institutional investors active in major cities, wealthy individuals buying  houses around the world and coordinated economic growth. The IMF concludes, “All of this suggests that house prices are starting to behave more like the prices of financial assets, such as stocks and bonds, which are influenced by investors elsewhere in the world. In countries that are more open to global capital flows, prices of both homes and equities tend to be more synchronized with global markets.” This is not necessarily a bad thing, though one wonders if it is making life more difficult for those struggling to buy their first house. At any rate, globalization continues to envelop many things, including housing.

Everyone in Venezuela is Poor

It is easy to forget Venezuela in the midst of all the other tumult convulsing our world. But it’s worth reminding ourselves from time to time just how bad things have become there. Since 2014, a consortium of Venezuelan universities have conducted an annual survey of conditions on the ground in the country. This year’s, which came out a couple months ago, found that 9 out of 10 Venezuelans live in poverty. Nearly 60 percent live in extreme poverty.  In addition, the survey asked more than 6000 Venezuelans, “do you consider your family’s income enough to buy food to consume inside and outside the home?” The shocking answer is that 89.4 percent answered this question no. Buttressing this data is the fact that 64 percent of respondents reported losing an average of 22 pounds in the last year. And no, Venezuelan economic policies are not the answer to America’s obesity problem. Instead, Venezuela continues to offer stark warning lessons for other countries on how not to run a country.

China Driving EV

More cars are sold in China than in the U.S. nowadays, a consequence of China’s larger population and continued economic growth. So it shouldn’t be surprising that the country is also driving the sale of electric vehicles, especially since the government is pushing for EVs to alleviate the air pollution problem. Colin Mckerracher of Bloomberg quantified the EV market in a recent tweet storm (if only certain presidents used Twitter so productively).  The estimate is that 1.6 million EVs will be sold in 2018, and in China full-on electric car sales are pulling ahead of hybrids. McKerracher notes that “There are now 14 countries where EVs were above 1% of total vehicle sales. Still small, but most countries cross over 2% around a year after crossing 1%.” There are increasingly a diversity of EV cars to choose from as the second chart shows. This will likely also help increase sales of EVs, as people have more choice of what type of EV to buy. We expect the percentage of EVs on the road to increase exponentially as the technology matures.

Charting Chinese HALs, Let Women Work, Less Democratic Countries

You may think you did not receive* your regular dose of INTN last week because we had our third knee surgery in three months. But surely you know we are made of sterner stuff than that. No, what prevented delivery of edifying, informative and important international news and data was the continuing technical problems we were having with our previous email delivery service. Yes, this week we have dipped our toes into the clean waters of a new company, Mailchimp, which you have probably heard advertise on what seems like every podcast ever. So far so good. We have taken the opportunity of this change to institute the slightest of redesigns. More changes may be coming. If you have any suggestions for additional redesign, or for that matter, content, or anything else, feel free to let us know. So, even as we eye fonts, colors and backgrounds, we chart the HALs of China, proclaim “let the women work” and revisit authoritarian views of democracy. It’s this week’s International Need to Know, the Southern District of New York of international information, raiding wherever and whomever we must to bring you our strange, fun and ever changing world.

*Actually about 10 of you received last week’s newsletter–now dubbed The Lucky Ten–T-shirts and other accoutrements are in the mail (delivered by our previous email service)

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

Charting the HALs of China

As China continues to emerge on the world stage, and the U.S. vacillates between acting the star and stalking off stage to harangue the woman selling popcorn, there is increasingly an urge in some quarters to pit the two countries in a competition in every single sphere (we will discuss in future issues the trade and investment sphere). Perhaps no more than in progress in artificial intelligence. There is a fear among many that whoever achieves true AI first will rule the world. We expect it won’t work out that way, that science will progress differently than as depicted in a two-hour super hero movie, that multiple countries researching AI is a good thing, not a bad one. But nonetheless, we are gratified to present, via the former Mexico Ambassador to China, a comparison of the two countries AI progress in the table below. The only place China leads the U.S. currently is in collected data, which thanks to government efforts, companies such as Tencent, and a huge population, is enormous. BTW, Ambassador Guojardo’s twitter feed is full of informative and surprising information, presumably curated by the Ambassador himself and not by some AI bot. A second BTW, charting AI progress is particularly apt this week on the 50th anniversary of Stanley Kubrick’s remarkable 2001, A Space Odyssey. It is not our favorite movie of all time (though it ranks in our top twelve), but it’s probably one of the most important, prescient and impactful.

2001: A Space Odyssey Official Re-Release Trailer (2014) – Stanley Kubrick Movie HD

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Let Women Work

In too many parts of the world, it’s difficult or illegal for women to be part of the workforce, or at least in certain sectors. In fact, the World Bank reports that 104 countries continue to have laws preventing women from working in specific jobs. The two regions where this is most common (see chart below), are the Middle East and South Asia. Sectors such as mining and construction are often targeted by countries for limitations on women working. This seems especially silly to us since last summer we used a series of instructional videos posted to Youtube by a woman in Australia that guided us to changing a door into a wall and window. In a recentinterview in The Atlantic with Saudi Crown Prince Mohammed Bin Salman, he indicated he will continue to improve women’s rights in his country. Let’s hope he does and that such thinking spreads throughout the region and elsewhere around the world. In the meantime, we’re leaving low hanging economic growth on the vine by not utilizing female talent. If I had a hammer, I would hand it to the woman in Australia to finish up my home construction project.

The View from Down There

>Following up on our story a few weeks ago that in countries where the population has less political party affiliation there is less allegiance to democracy, Pew Global also finds that people in less democratic countries have more favorable opinions of China and Russia. For example, 5 percent of Swedes agree that China “respects the personal freedom of its people,” but 56 percent of Tunisians do. Only 14 percent of Germans believe Russia respects the personal freedoms of its people, but 85 percent of Vietnamese believe such a thing. Pew also asked these countries their opinions of France and the U.S.  Authoritarian countries rank the U.S. higher for respecting personal freedoms (61 percent) than France (51 percent). Beauty, or freedom, is in the eye of the beholder, and if you live in a country where you are more beholden to an authoritarian government, your views are colored in that direction.