We were to leave our dormitories later
on this morning. At 9:50AM Chico
students met in the lobby and walked across a length of campus for a lecture
from a Ph.D. professor for our lesson in economics. The room was stifling and
we were already hot and sweaty – shirts soaked, from the humidity of the walk
to our classroom.
A slight Chinese woman, barely
thirty, began her lecture by welcoming us to the university and telling us her
name was Zhu Oienyu. Her English name was Rita – I was grateful for this. Tao
came with us this morning and sat at a seat in the back of the room.
The topic: China’s Macro-Economic Analysis Since Reform
& Opening Up. I thought the title was a little funny because Chinese
often translate literally and ‘opening up’ seemed an awkward choice of words
for economic reform. Rita gave a good
synopsis on the Chinese economy as well as its historical economic reform since
the mid-70’s.
From my notes – PowerPoint
prepared and given by Zhu Oienyu (aka Rita):
Ways the macro-economy and growth
is defined.
I.
Total characteristics of China’s macro-economy since reform
and opening
A.
High economic (GDP) growth
1979-2005: GDP
growth 9.6%
It is estimated that China’s economic growth will exceed Germany by 2010 and Japan by 2020.
II.
Total amount of export and import
III.
Total amount of FDI
IV.
State foreign exchange reserves – China is the 1st
in the world
V.
Rural poverty population per capita income
VI.
Per capita lifespan – GDP
Reasons for high economic growth
in China
– capital, labor, resources, technologies, institutions.
Two big stages:
1978-1996 and 2003 to now, →
Fight with inflation
1997-2002 → fight with deflation
4 Peaks of inflation:
(1) 1980 → 7.5%
(2) 1985 → 9.3%
(3) 1988 → 18.5%
(4) 1994 → 24.1%
How to control inflation in China during periods of high economic growth
when China’s
economy developed rapidly? This was the question China posed.
4 Reasons for inflation:
(1) Demand-pulling inflation
(2) Cost-pushing inflation
induced by rising in agricultural output’s price
(3) Inflation in transition
period
(4) Structural inflation: induced
by imbalance of economic structure contradiction between basic industry and
processing industry.
Rita also discussed the
relationship between the rises in investment creating an increase in aggregate
demand.
For clarification, a planned
economy or shortage economy refers to a situation in which the government
controls the price. China
is moving away from this structure to one that is more democratic.
SUMMARY:
For the medium term:
“China still has a vast potential to
catch up in productivity with more advanced countries. However, China’s
industry, investment, and export based growth model has also become
increasingly problematic because of the trade tensions, and environmental and
resource constraints it entails.”
I asked about the current
unemployment rate in China
and Rita responded that it was under 5%. Earlier in the power point, Rita
referred to a slide that talked about Premier Wen Jiabao attending a national
conference and one of his goals for the coming years was to reduce the
unemployment rate to 4.6%.
Chico students asked Rita about some of the
dynamics of the economy. Students asked about the liquidity of the Chinese
stock market and changes in the current banking system. Many banks are owned by
the government and Rita mentioned that she believed there would be a gradual
relaxation of this policy and that in the future financial institutional
markets would begin to open.
Rita was very helpful and patient
in providing an overview of the economy. We were all hungry, and invited our
hosts Tao and Tony and professor Rita to join us for lunch. We walked across
the campus and street to a nearby restaurant and asked Tao to order dishes that
represented Wuhan
traditional cuisine. We were once again delighted with a variety of tasty,
spicy food. Some of the dishes included: spicy noodles and bamboo shoots, green
onions and beef, been curd, fried sticky rice roles, spicy rabbit and onion,
glazed duck, glazed chicken, steamed rice, and a vegetable and rice flour soup.
Upon leaving the restaurant, a
bus picked up the Chico students and Tao and
Tony for a tour of the Science
Park at Huagongtech
Headquarters. We were told that this was a Science
Park, a large part of which was
sponsored by Huazhong
University. Professors of
the University were encouraged to conduct research and/or start an enterprise
business at this industrial science parkway. Upon entering, we were greeted by
a large, modern, stainless steel structure that twisted and twirled its way up
to the sky. The bus stopped and we momentarily unloaded to take some snapshots
of the large administrative building and sculpture. We reloaded and were first
taken for a ride around the grounds.
I was fortunate to sit next to
Tao, because he explained the sheer enormity of the place we were at. Already,
the administrative grounds seemed quite large. But the whole grounds composed
1,100 mu – each mu was 660 square meters. So. The whole park was 726,000 square
meters (WOW!). The grounds were well landscaped and beautiful. Keeping with
tradition, several ponds, weeping willows, bamboo, and other graceful and
peaceful plants and trees adorned the entire grounds. Large buildings filled
sections of the park. Tao explained that the government encourages the university
to buy companies and that several of the companies were of our (Huazhong)
University. In keeping with this tradition, the University in turn encourages
its professors to start a company. The grounds used to be rich farmlands. All
of the buildings belong to the science park.
We parked in front of the Administrative Center and made our way into the main
lobby. The back of the lobby housed a tall hanging steel structure – almost
like thin steel wires with short bamboo shaped structures that hung from the wires
horizontally. They draped from the ceiling and looked very graceful, given the
strength of their construction. We all hopped on separate elevators to the top
floor and were led down the hall to a large conference room with a dark wood
table surrounded by leather chairs. When we all sat down, Tao introduced us to
a young man, who would be leading us through a power point presentation of the Science Park’s development.
Tao translated the power point to
us and we listened intently about how the Science Park
was divided into two parts. One part was an industrialized park and the other
part was an incubator. The incubator was opposite the Huazhong University
and was 100 mu. The industrialized area, inside the Science Park
was 100 mu and 8k from the university.
In 1999, the Science Park
was developed. In June 2001, the Science
Park was recognized by
the ministry of education and technology as a national science park. At the end
of 2006, the Science
Park was host to 132
companies. 97 were an incubator and 35 were inside the park.
The building areas comprise
200,000 square meters and the annual income of the park is 1.5 billion Yuan.
Since November 2006, the
department has entered a new stage. Two areas have been built in the park. One
area is for small innovative businesses (under 5 million Yuan) and the other
for larger businesses. The incubation period is generally 3-5 years. Incubators
are mainly about research but also include sales and development – but
generally, not much production. The incubator shares some services including –
sharing of information, students, some resources, etc.
Since 2000, 35 firms have
graduated from the park. Mainly, they include optical products (information).
Advanced manufacturing, new materials, laser manufacturing, optical manufacturing,
and information technology are a few of the firms that comprise the park.
Research groups come mainly from the university; however, some of the capital
comes from the outside. All patents belong to the university; however, a
portion of the proceeds (i.e. shares) for these patents goes to the researcher.
The utility belongs to the firms.
Generally, a committee will
decide if an idea from a university professor is meritous of moving into the
technology park as an incubator. At each setting, students were given a booklet
about the park. We thanked our gracious host for his time and reloaded on the
bus to visit some of the firms.
The first firm we visited in the
park was the Research Center of International Standards for Manufacturing Technology. The
deputy general manager greeted us and shared that the leader of this group is
now the minister of education. Inside the building were several motors and
relay systems for numerical manufacturing. The manager told us that 10,000 of
their systems sold a year – mostly to China,
but some were sold to the United States,
Canada, and Argentina.
Numerical control started in the U.S.
in 1952 with MIT and that to date, the U.S. is the best. He explained that
in product development, Japan
and Germany
are doing well. Given the growth in China,
the firm is trying to catch up with the U.S. and others in this industry.
Their main competition is companies with the same function (services), quality,
and size as theirs. Currently, about 80 masters and Ph.D. students are working
there.
Numerical control systems support
water generation, weapons, and steel. Currently, 3,000 staff are employed at
this firm. Given the large increase in staff over time, the manager explained
that it was a painful process for professors moving from instruction to
enterprise development. Huazhong
University is the second
biggest shareholder. When asked what made this firm better than others, the
manager explained that the quality and function were the same, but that they
were the leader in price and service.
Next stop. Wuhan Huagong Genuine Optics Technology Co LTD.
A firm that specializes in optics and circuits. Upon entering the building, we
were directed to put on a lab coat, plastic shoes slipcovers, and a hair cap.
We climbed a set of stairs and waited for our firm’s host to have his
fingerprint verified before entering. Once inside, we were able to see a flurry
of activity happening largely at desks and computer terminals throughout the
building. A number of stations were working on coaxial cables, while others
were carefully soldering circuits onto small relays. At the back of the
building, a conveyor belt carried partially finished products to a worker who
scored optical lenses electronically with an electronic machine. Other workers
were packaging material for delivery. The numerical systems design we had seen
in pictures at the previous firm were found at different workstations in this
building. We were told that Cisco was one of their current clients for a relay
project they were working on. It was explained that it was not unusual for the
same client to request different packaging and slightly different circuits for
changes in their products. Much of the work that was being done included
machine precision to cut or mold small parts, while workers cleaned, carefully
cut or scraped remaining pieces off machine runs, and steadily looked through
microscopes to ensure that pieces met the utmost quality standards before being
moved onto the next step (job station).
After we exited the shop floor,
we walked back down the steps and all posed in front of the building for a
picture of the class dressed in lab clothes.
Next stop. Wuhan Huagong Laser Engineering Co LTD. This was a welding,
marking, and laser systems manufacturer. We were greeted by a young woman who
told us about the engineering firm and the types of welding, marking, and laser
work the firm was engaged in. She explained that in 2000, the firm went public
and that they have since also acquired an Australian firm. She also explained
they were a subsidiary of the optics firm. Some of their clients include:
Epson, Sony, Nokia, Siemens, Shanghai GM, and Sneider Electric. Primarily, they
work with stainless steel. Several samples of their work, and pictures on the
wall showcased the equipment the firm uses.
Some of the product lines in the
middle/low laser end include: fiber laser marking system, diode pumped laser
marking system, and lamp pumped solid state laser marking system. Some of the
product lines in the high laser end include: profile plus numerical control
laser systems and magician plasma and oxy/fuel cutting. She shared that the
firm had many ISO Certifications and CE Certifications.
We climbed the stairs, waited
again to be admitted, and once inside were greeted with machines everywhere,
and people closely watching their work. We watched one machine as it made a
precision laser marking on a piece of heavyweight paper. I happened to look out
a window and noticed that there were several fabrication buildings opposite
this one, and that each had a number on it, like 3 or 4, etc. It was at this
moment that I realized China
was really going to give the U.S.
a run for their money.
They had the people, they were
catching up on the technology, and they had a hell of a lot of motivation. So
what was stopping them? Right now, nothing. With the exception of a government
that was trying to figure out just how to play the economic game while
maintaining some sense of order among its people. Watch out America – here China comes. And it’s coming fast.
As the bus took us back to our
temporary homes, I thought a lot about how much trouble we would be in if we
didn’t wake up. The Chinese were smart. And it was only a matter of time before
their underdeveloped land became a technology behemoth. They already had a huge
trade surplus and they already had manufacturing figured out. Now it was a race
to the technology. America
was technology savvy, but seemed to now also be entering an innovation stage. China knew this, and I had heard from one of the
students, or perhaps it was a teacher, that China was really beginning to push
innovation and finally incentives were coming right along with it. So now what?
China
was steadfastly on its way and wanted what other countries already had –
especially America.
This left me thinking – run America run!
We were back at the hotel. I was
tired and decided to cover a few days of journaling and something cool to
drink. Then off to bed.
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