My daughter, the Financial Planner, says “don’t invest in China,” advice I only am just beginning appreciate. So, not knowing a thing about the Chinese economy and only able to judge by what my eyes have seen for a year, I asked the most knowledgeable local person I know, my trusty tutor.
He said a noted Chinese economist calls the economy a giant old green cucumber; it looks huge and juicy on the outside but it is dried up inside. Then he ticked off all the things I knew to be true – that people are woefully underemployed, that food prices are way too low although they are increasing due to drought, that far too many able bodied people work on the farm without much farm equipment, one donkey and one plow, and sometimes absent a donkey, there is your wife.
People are forced to retire in their 50s and women occasionally forced into retirement in their forties. Laborers earn the same daily wage without regards to their competence which results in shoddy workmanship. No one in China was shocked when 550,000 dwellings perished along with the earthquake. Pride in one’s workmanship is confined to big cities where the competition is keen.
People stay at the job 8-10 hours every day 7 or 8 days a week but the vast majority of workers sit idle many hours. Children, meanwhile, spend an inordinate amount of time in school until they are 18 or 19 and then go into these nothing jobs.
The Yuan (officially known as Renminbi) exchange rate is artificially low. It is 6.5 as I write this, but, he said, it should be 9 RMB to the US dollar. An honest exchange rate would bring many people to ruin, and China would be hurting badly.
Why is the United States letting this happen? Maybe the problems with North Korea have brought so much unrest to Asia no one wants additional upset apple carts. Another is the high price of oil for Americans which has depressed our dollar against the RMB. All this is speculation.
Meanwhile Japan has been mighty cozy with Mongolia; Mongolia has lots of unused land while Japan is all rocks! Maybe China’s northern border is about to get an unwanted neighbor. Nothing upsets the Chinese like a reference to Japan. But this is speculation. The 350 billion American dollars that Beijing has squirreled away would not make a dent in the economic mess a Yuan adjustment would bring.
One income stream could be helped immediately. Tourism is important but China lacks adequate infrastructure in most places off the path. Travel for tourists is limited to the best (not better) hotels, halting some of the most beautiful and worthwhile trips. A visit to China is a valuable experience but for seniors especially a hazardous journey.
On the bright side, economic distress might make China more open and more eager to accept foreigners and their money, of which I am one. but I doubt it.