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Senior Contributor

Top-20 Things I learned in China

Hello boys,

 

I had promised to make some posts here while I was in China, but I somehow I lost all my connectivity there at a point of my trip. As my laptop and celphone were useless, I did not have access to some important data that I tend to save on Google accounts, which are blocked in most computers in China. But here I will summarize what I have learned in that country and that may be interesting to you.

 

1. "Where there is a will, there is a way". In China, there are more things illegal than most places. However, it is relatively easy to make things happen. The ones who are a long time in the country and either have the right connections, know the law's loopholes or the rules that are not enforced, can almost make literally anything happen in that country.

 

2. I guess that may be offensive for some. But I don't see a lot of complexity in Chinese thinking. It is still a very closed country compared to others and many things widely known around the world are not recognized by the Chinese. In fact, I found some notable people there as naive for the position they hold. In my opinion, the Chinese censorship makes we think that they know a lot more that they really do.

 

3. In Beijing or Shanghai, there is a significant number of foreigners living there or traveling while they do business. Yet, some people have profound mistrust on foreigners generally speaking. It is very likely that in Beijing, taxi drivers may deny you a ride because you are foreigner. In Latin America, it happens quite the opposite. Here, people will want your dollars, euros, pounds or yens. In China, they hate the most the Japanese. They are not as bad to Americans or British, but still view as imperialists. They don't dislike that much Brazilians or Germans. In fact, Volkswagen and BMW are the top selling cars.

 

4. It is really hard to know what will happen with Chinese macroeconomics. The bubble is a reality that many people did not want to see. State TV pushed for investments in a lot of areas. It resulted that people without knowledge went to the stock market because they did not want to lose the opportunity as the country grows so much. But there is big difference comparing to the U.S. bubble that resulted in 2007/08 great recession. The Chinese government is one of the few countries in the world that does not make deficits. They have a lot of cash.

 

5. The infrastructure of Shanghai and eastern China in general is very impressive. For instance, I've been to NYC and Chicago and traffic in both cities is a lot worse than Shanghai that has over 20 million people. Viaducts and road infrastructure is uinmaginable even in American terms.

 

6. Strict control of production means do no exist in China for over 20 years. But that dark days of deep scarcity live in the unconscious of many Chinese, some people say. Lines are not something respected at all. There is huge anxiety on their part to enter a flight, a restaurant, a train line, a bar, to purchase any good...  To my eyes as a Brazilian, the paralell here can be made to the days of hyperinflation - seeming that all is going to end soon and you can't lose any opportunity. 

 

7. The food security issue is a major priority for the Chinese govt. Some people talking about asked not to be identified because it is a sensitive issue.

 

8. The huge corn reserves hold by the Chinese govt (at 150 million tons) is because they fear that something really bad can happen. 

 

9. Corn yields are three time higher than soybean yields in China and yet the cereal is subsidized. As this is the prefferred crop of the Chinese, there is the quota of imports. After the quota is reached, tariffs go up. Wheat and rice are also profitable. 

 

10. As soybeans are a lot harder to be grown there (just can be grown in some nothern regions) and have to import seeds from Europe, the import market is free. The soybean production may go down in China. Eleven million metric tons of purchases are guaranteed.

 

11. Sorghum purchases are made by pvt enterprises. The soybean market is controlled by both govt and pvt enterprises. The wheat market is controlled by Cofco, the largest state-run grain company. The corn purchases are also just state-run.

 

12. An interesting fact about rice is that is grown for two seasons and it is also used for animal feed. Yet, the Chinese govt will pay rice growers to stay on their lands. 

 

13. The blockades of imported of GMO corn or sorghum may continue to happen in China to protect the local market. But there will be no way to prove it that they did for economic reasons. They may be fine with WTO. Also, GMO corn is a real worry.

 

14. Analysts say that there is not a real prefference in China from which country the imported grain comes from. What matters, they told me, is the season. When Brazilians or Argentines start to harvest, most of the American crop is sold out.

 

15. If you think that the agricultural output in China already reached the maximum possible, you are really wrong. There will be a rural exodus of 2.3 MILLION PEOPLE in the next few years and they plan to feed those people with local food. Perhaps that's the biggest rural exodus for a short period in the world's history. And they know how many people will do it because domestic migration is controlled by the govt. Chinese farmers are small, but may get bigger.

 

16. Brazilian American entrepreneuer Manuela Zoninsein created the startup SmartAg Analytics to help local farmers make their machinery and other online purchases through the use of data and connecting the seller to buyer. The Chinese govt is happy with that enterprise that may help to boost Chinese agriculture. 

 

17. No government boosts more internet connectivity in the field than the Chinese govt does. Investment in irrigation may push yields.

 

18. Drones are an important technology already used in Chinese agriculture.

 

19. Labor intensive crops like garlic have the highest potential in China. These crops do not need land and need a lot of people. China has it. 

 

20. Be careful with the corn market. Nobody known when the Chinese government will sell the corn reserves. It is certain that when they do, it will in big volume - maybe 50 million tons.

 

So let me know what you think on these things! I'm happy to share it with you.

7 Replies
Honored Advisor

Re: Top-20 Things I learned in China

Thank you thank you Luis,

 

Well thought out---- I will restudy this this evening   

 

Appreciate your thoughts

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Veteran Contributor

Re: Top-20 Things I learned in China

I was in China last fall

I agree with most of the above post

What I found in no particular order of thought

We had no problem with a taxi

The people on the street would stop me and want me to pose with their parents, for a picture

Their food markets stink to high heaven

They have complete faith in their gov't for lots of cheap food

The chinese think a contract is the starting position for negotiation

We found the person on the street very polite and friendly

They are very proud of the advances they have made in the last 30 yrs

They make no apology for stealing technology, any place they can find it

Their rational is that they [the common people] were suppressed for 5000 yrs, that they have to catch up to the west, any way they can

I think about 3/4 of their advertisements featured western models

We had internet, google, Wi-fi and 3 english news channels in our room every night

Any person that goes to university will make every effort to learn english

Mandrin is their official language, for all of china

Their number one concern is the education of their one offspring, although 1 child/couple,  has been relaxed a bit

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Advisor

Re: Top-20 Things I learned in China

Thanks.

 

Hadn't really thought about it this way, but I guess unknowable future government policy- Argentina in soy, China in corn, are a bit of a sword hanging over the markets.

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Honored Advisor

Re: Top-20 Things I learned in China

hardnox,  Don't forget that the quality of each may be of some concern.

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Advisor

Re: Top-20 Things I learned in China

Yeah, I'm not making that as a bearish argument, rather that it should give reason for pause before getting too bullish.

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Honored Advisor

Re: Top-20 Things I learned in China

Yep, I agree....    It will only be bearish IF and when they change their policies.   Up until that time, it really doesn't matter.  Those bushels are not on the market.   Smiley Wink

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Honored Advisor

Re: Top-20 Things I learned in China

It seems to me that it becomes a position that is hard to get out of... Similar to 18trillion of debt and low interest rates....we might like to think they will go higher but they can't.....

 

Once commodities begin to be the backing for currency and the hedge for economic problems, it looks like a condition that stays for a while......

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