ECONOMICS BY OBJECTIVES
CHAPTER 1
I. INTRODUCTION
Economics ... what IS economics? We'll get to the formal definition in a minute, but suffice it to say that economics is very important to individuals, to countries, and to the world. For example, have you ever wondered why there is unemployment? Why is it that some years, like during the Great Depression, well educated and highly skilled people couldn't find jobs and had to sell apples and pencils on street corners? People in cities starved, but on farms, crops rotted because farmers couldn't afford to hire people to pick the crops, and even if the crops were picked, no one could afford to buy them. Why? What caused this unemployment and is it possible to avoid or eliminate unemployment?
Yet, during WW II and during the Vietnam War, almost everyone who wanted a job could find one. In Japan, for many years, the unemployment rate had been very low ‑ around 2‑2.5%. In Taiwan of the Republic of China, the unemployment rate in 1982 was even lower - 0.96%. RCA once even hired trucks to go around the neighborhoods, recruiting people for the factories through a loud megaphone. Yet, in 1997, the economic miracles of Asia become Asia's economic crisis and Japan has been in an economic funk since 1989. And in 2007, the world went into what is often called the Great Recession. What happened?
Why? How can the labor shortage be solved and how can one economy be short on labor while another has surplus labor? How can economic miracles turn into economic disasters?
In Hungary, after WW I, inflation was so bad, that in a 18‑month period, prices went up by 10 to the 28th power ‑ what cost H$1 one day, cost H$10,000,000,000,000,000,000,000,000,000 18 months later. It is what economists call hyperinflation. In the United States, in 1968, some called the economy "over heated" when inflation was less than 6% ‑ that is, what cost $1.00 one day cost $1.06 a year later. What is “overheating”?
What causes inflation and what are the costs to society of inflation or to fight inflation? What can or should be done to combat inflation?
In 1949, mainland China and Taiwan of the Republic of China both had about the same capita income ‑ less than $100 per year. Sixty years later, the per capita income in mainland China is about $1000; in Taiwan it was close to $17,000. Why? How can one economy grow so much faster than another?
Russia, formerly the world's number two economic power, and the United States, still number one economically, have argued for decades about which system is superior ‑ centrally controlled communism or free wheeling, laissez‑faire capitalism. "To each according to his needs and from each according to his abilities," or "The profit motive is the essential driving force" ‑‑ which slogan tugs at your heart, which system moves the economy? The Soviet Union and its economies have collapsed while the US economy remains the world's strongest economy. Why? Are free markets the answer to communism?
In Mexico, two oil crises caused revenues from oil to increase tremendously ‑‑ once in 1973 when oil prices rose from $1.80/barrel to $11.20/barrel overnight, and once in 1979 when oil prices rose from $12/barrel to $36/barrel overnight. Yet, many Mexicans still barely had enough to eat while the rich got richer. In Taiwan, the poorest 40% of the people made over 22% of total income ‑ an income distribution that is better than the United States.
Why? How can one system, with hundreds of years of history, have only rich and poor, with no middle class, while another economy, in less than 40 years, can establish a dominant middle class? What are the consequences of uneven income distribution?
Unemployment, inflation, economic growth and income distribution: these are the macroeconomic issues ‑ the issues of entire countries and the world, the issues of the wealth of nations.
What are the economic issues of individuals and firms? Diamonds serve no apparent biological need; water is essential to life. Yet diamonds are more expensive than water. Why?
An extra barrel of oil from Saudia Arabia costs less than twenty cents to produce, yet the price of oil has been as high as $40/barrel. On the other hand, a toy train in Hong Kong costs seventy cents to produce but only sells for a dollar. Why?
In the housing market, rent control causes chronic housing shortage, deteriorating housing and black markets. In the water industry, price ceilings allow everyone to have as much drinking water as they wish for almost nothing. Why does price control work so well in one market but so badly in another?
In large cities like San Francisco, the freeways are filled with cars, most going into the City in the morning and then leaving the City at night. In the City, some people go from Market Street to Kearney Street, while other rush from Kearney Street to Market Street. Cars, people and cable cars are going in every which direction. There are huge hotels like the Fairmont; there are small rooms on the back streets of Chinatown. Some stores sell jade rings for thousands of dollars; others sell jade rings for $5. Some restaurants serve sizzling dumplings and Peking ducks, others prime rib with horse radish, and still others fresh Dungaree crabs. What is going on? How can this chaos persist day after day, year after year? How can we understand what is going on? How can we stop this chaos? Should we stop this chaos?
All these issues, the economic behavior of individuals and firms, are microeconomic issues.
Look in the newspapers, read the history books, turn on the television ‑‑ economic issues are everywhere. They affect the world, they affect countries, they affect huge multinational companies, they affect mom‑and‑pop stores, they affect individuals, and they affect you.
Learning economics will help you understand what's going on in the world. Knowing economics will enable you to increase your profits. Understanding economics will allow you to differentiate good economic policies from bad economic policies.
Yet, economics ‑‑ despite the seeming inability of economists to ever agree ‑‑ is not that difficult. Its mathematics seldom gets much harder than differential equations; its semantics barely match beginning logic. But the consequences of economic policies are very real and the difference between the results of good and bad economic policies can literally mean the difference between prosperity and starvation. Economics is not hard, but it is most important. Despite being called the dismal science, economics is actually enjoyable to certain people.
II. ECONOMICS
After studying this section, you will be able to:
A. Recall the definition of ECONOMICS.
B. Recall the ultimate objective or bottom line for studying economics.
C. Recall the definition of scarcity.
D. Given a good or a resource, tell whether that good or resource is scarce and explain why it is or is not scarce.
E. Recall why we have to study economics.
"If you put all the economists in the world end to end, they would not reach a conclusion." ‑ George Bernard Shaw
A. Be able to recall the definition of economics.
(Def: 1) Definition: Economics is the study of how individuals and society optimize the use and allocation of scarce resources among competing ends.
Now we have a formal definition of economics. It is important that we fully understand this definition and its implications because as we really get into the fascinating but complex subject of economics, it is all too easy to be swayed by politicians trying to push a particular point of view and by economic scholars, who, while better at hiding their personal prejudices, nevertheless have them. If and when you do become confused, then return to the basics; begin again from the definition of economics.
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B. Be able to recall the ultimate objective or bottom line for studying economics.
There are a number of very important points in this definition. First economics studies how we optimize the use and allocation of scarce resources. This is the ultimate objective, the bottom line of the study of economics and also the final objective of economic policy.
In assessing an economic policy, whatever our political philosophy, we must consider if it optimizes the use of scarce resources or if it makes better use of scarce resources than the best alternative policy. If it does, it is good economic policy. If it does not, it is bad economic policy.
For example, when governments use fiscal or monetary policy to change demand, there will usually be a tradeoff between unemployment and inflation. Suppose the government decreases demand to fight inflation, but this causes unemployment to rise. Is this good economic policy? Republicans, Democrats and Communists; Monetarists and Keynesians; young people and old ‑ all will give different answers from their own perspectives. But for society as a whole, what is the answer? To find out, we must evaluate the relative social costs of inflation versus unemployment in terms of the ultimate objective of economic policy. That is, does the policy optimize the use and allocation of scarce resources?
C. Be able to recall the definition of scarcity.
Resources are scarce. This statement is important, but what is a scarce resource and are all resources scarce? For example, there are very few parking spaces on campus, are parking spaces scarce? There are many students on campus. Are students scarce? There are 1.3 people in China. Are Chinese people scarce?
Typically, one would answer that indeed parking spaces on a college campus are scarce. Anyone who has ever tried to park on campus should know that. How can we be sure, however, if we don't know the definition of scarcity?
With 29,000 students going to school at San Francisco State University, and with so few parking spaces and the difficulty of getting the classes that you need, surely students are not scarce. Yet, we cannot be sure unless we know the economists' definition of scarcity.
There are 1.3 people in China. Are Chinese people scarce? The answer seems obvious. Yet, we cannot be sure unless we know the economists' definition of scarcity.
So, what is a scarce resource?
(DEF: 2) Definition:A resource is scarce if, at price = 0, the amount that people demand exceeds the amount that people want to supply. Use this definition to answer the questions we just posed.
D. Given a good or a resource, be able to tell whether that good or resource is scarce and explain why it is or is not scarce.
Using this definition, we can see that parking spaces on campus are definitely scarce. If anyone could park on campus, on the street, or in the parking lots for free, then the streets and all the lots would be even more crowded and many more people would not be able to find parking.
That is, at zero price, the number of parking spaces that people would want would far exceed the number of parking spaces that the school could supply.
So far, no surprises. But, it turns out that students are also scarce. Impossible? Twenty‑nine thousand students are a lot of students for San Francisco State University's beautiful but small campus. True, but what about the relationship between the number of students that people would want and the supply of students if the price of students was zero?
For example, suppose we told the student union that they could have all the student help they wanted for free? ("Right on!" the student union would cheer.) The student union would certainly want to have a lot of free student help. But how many students would work for the student union for free? Not many. ("Rats!" the student union curses, as yet another opportunity to exploit students vanishes.) Thus, at zero price, the amount of students demanded would be much more than the number of students that would be willing to work. Thus, even though there are many students, students are a scarce resource because ...
The key in deciding whether a resource is scarce is to first understand the definition of scarcity and then to apply this definition to the resource in question.
E. Be able recall why we have to study economics.
It is important to understand the concept of scarcity, for without scarcity, there would be no need to study economics ... or anything else.
For example, why do you go to school? So that you can find a good job to earn money to rent or buy a house, purchase food, acquire clothing, and get a nice car. But if at zero price, people could have as many houses as they could live in, as much food as they could eat, as much clothing as they could wear and as many Porsches, Acuras, and BMWs as they could drive, how many of you would go to school? Not many, and there would be no need to study economics or anything else. Your economics teacher would be out of a job, but that's okay, because he wouldn't need one.
Alas, because almost all goods are scarce ‑‑ at zero price the amount that people want would exceed the amount available ‑- people cannot have all these luxuries without studying through the night and working long hours at their jobs. And even then, they may not be able to get all of these goods. In fact, most people have to decide how much of their budget they can or want to spend on different goods. Which brings us to another important point: because of scarcity, people must decide where, how much, and how to use the resources.
Thus, we must study economics because resources are scarce. and because of scarcity, we study economics to find out how to optimize the use and allocation of scarce resources among competing uses.
QUESTIONS
1. Name some resources and explain why they are or are not scarce resources.
2. Name some resources which are not scarce. Explain why these resources are not scarce.
3. The government may raise interest rates to fight inflation. How would you assess whether this is good or bad economic policy?
4. Sometimes the government raises taxes in order to fight inflation. If you were a republican, how would you assess this policy? democrat? socialist? communist? economist?
5. Name three important aspects of the definition of economics.
6. Define economics.
7. Define scarcity.
8. What is the bottom line of economic policy?
9. Why is it necessary to study economics?
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III. PRODUCTION POSSIBILITY FRONTIER
After studying this section, you will be able to:
A. Recall the definition of the production possibility frontier.
B. Given data, draw the production possibility frontier.
C. Show understanding of the production possibility frontier (PPF) by showing what happens when:
1. The economy is on the PPF.
2. The economy is inside the PPF.
3. The economy moves from one point of the PPF to another point on the PPF.
4. When the economy moves from inside the PPF to the PPF.
5. When the economy moves from the PPF to inside the PPF.
The production possibility frontier (PPF), a simple concept, can give important insights to complex economic issues. For example, moving from one point to another point on the PPF increases the economy's output of one product, but decreases the production of another good ‑ this illustrates the tradeoffs that must so often take place in real life. You can't have your cake and eat it too.
The PPF also shows what the economy can produce at full employment of resources. While this does not strictly show the optimization of resources, it does show full employment of resources ‑ a necessary but not sufficient condition of resource optimization. And, the point on the PPF which also reflects society's preferences ‑ the point of optimization of resources ‑ graphically illustrates the bottom line of economic policy.
A. Be able to recall the definition of the production possibility frontier.
(DEF: 3) Definition: The production possibility frontier shows what an economy can produce IF ALL its resources are FULLY employed.D
B. Given data, be able to draw the production possibility frontier
For example, if an economy produced only Peking ducks and pizzas, and all of the economy's resources are fully employed, then the data showing the combinations of Peking ducks and pizzas the economy could produce would be:
The graph of the PPF of this economy is in Figure 1.
C. Be able to show understanding of the production possibility frontier (PPF) by showing what happens when:
1. The economy is on the PPF.
2. The economy is inside the PPF.
3. The economy moves from one point of the PPF to another point on the PPF.
4. When the economy moves from inside the PPF to the PPF.
5. When the economy moves from the PPF to inside the PPF.
The economy is on the PPF when resources are fully employed. That is, any point on the PPF represents full employment of resources ‑ ‑ exactly where on the PPF depending on society's choice. For example, if society only likes pizzas, then it would be at point "b" in Figure 1‑1. If society likes only Peking ducks, then it would produce at point "a." But, if people like both Peking ducks and pizzas, then it would be at a point like "c."
As long as resources are fully employed, then the economy would be on the PPF.
For economic policy to be efficient, the economy should, at the least, be on the PPF. In order for economic policy to be fully efficient, however, it must reflect what people want. Thus if people want both Peking ducks and pizzas, being at point "a" or point "b" would not be efficient.
But how do we know what people want? Does the government know what the people want? No, many countries, such as Russia, Communist China and North Korea used to think so, and used to think the government knew what the people SHOULD want. Because there are so many different goods and so many different people it is impossible for the government of any country, city or university to know what the people want or even what the people should want.
It is possible for the government to do surveys to find out what people want, but with so many people with varying tastes and so many types of goods, such surveys would cost moocho moola. Actually, the surveys are unnecessary because the information already exists ‑ in the prices of goods. Prices signal the value that people put on goods. In competitive markets, prices give accurate signals.
Microeconomics has a concept known as the price-budget line. that shows people's relative preferences. For example, suppose the average family had a weekly budget of $300 and he could spend this on Peking ducks and pizzas. If the price of Peking ducks were $10/duck and the price of pizzas were $5/pizza, then the family could buy 30 Peking ducks or 60 pizzas or some combination thereof. The equation for the price‑ budget line is:
(Eq: 1‑1) .... Y = PpdPD + PpzPZ
WHERE Ppd = price of Peking ducks
Ppz = price of pizzas
PD = number of peking ducks
PZ = number of pizzas
If the family buys 0 Peking Ducks, PD = 0, and
(Eq: 1‑2) .... Y = PpdPD + PpzPZ = PpzPZ,
SINCE PD = 0.
(Eq: 1‑3).. Y= $300= PpzPZ=$5/pizza* PZ
(Eq: 1‑4)..PZ = $300/$5/pizza = 60 pizzas.
On a two‑dimensional graph, if the horizontal axis represents pizzas, then this would be the point representing 60 pizzas.
On the other hand, if family buys only Peking ducks and no pizzas, then
(Eq: 1‑5) .... Y = PpdPD + PpzPZ = PpdPD,
SINCE PZ = 0.
(Eq: 1‑6)....Y=$300=Ppd*PD=$10/PD*PD
(EQ: 1‑7)..PD = $300/$10/PD=30 Peking ducks.
In Figure 1‑2, this would be the point on the vertical axis with 30 Peking ducks.
Connecting the two points of 30 Peking ducks on the vertical or y‑ axis and 60 pizzas on the horizontal or x‑axis, we have the price budget line ‑ which represents all combinations of pizzas and Peking ducks that can be bought with the budget of $300. For example, if the family wants to buy 10 Peking ducks, costing $100, then it would have $200 left over to buy 40 pizzas. This would be point "c" on Figure 1‑2.
Since the price‑budget line symbolizes what society can buy and the PPF shows what society an produce at full employment of resources, then the point of tangency, where the price‑budget line touches, but does not intersect the PPF, is the point of optimum utilization of resources. This point is shown as c in Figure 1‑3. Being on the PPF, point "c" indicates full employment of resources; being on the price‑budget line, this point also reflects society's preferences.
If resources are not fully employed, such as when there is some unemployment, then the economy would be operating INSIDE the PPF, such as at point "d."
Wars can also put the economy inside the PPF. During serious wars, economies are usually at full employment. But as resources, including materials, factories and people, are destroyed, then the PPF shrinks and the economy must operate inside the original PPF. Of course, if the country wins the war and takes over the resources of the conquered nation, then its NEW PPF may be even bigger. While it is possible for a country to gain from war, usually, because of the devastation of human and other resources, even the "winner's" PPF contracts. From a global perspective, wars always diminish the PPF.
So it was with conventional warfare. With nuclear warfare, however, the threat of mutual annihilation and the uselessness of radiation contaminated resources negate any potential gains.
Hyperinflation or "run‑away" inflation can could also cause the economy to operate inside the PPF. Hyperinflation occurred in the Confederacy during the last years of its losing the Civil War, in Hungary and Germany after WW I, in China during the last years of the war with the Japanese and during China's Civil War in 1947‑ 1949. For example, we have already mentioned Hungary's hyperinflation, in which the inflation rate was around 10 to the 28th power in an 18‑month period.
With hyperinflation, money no longer acts as the medium of exchange. When money, the "oil" of the economy, becomes useless, substitutes such as cigarettes or chocolate candy will begin to replace money as the medium of exchange; barter ‑ trading goods for other goods ‑ also becomes prevalent.
Money‑substitute and barter economies are less efficient than cash economies. In barter, for example, if a man with a goat wants to buy a blanket, he must first find someone with a blanket, who wants to sell his blanket and who also wants a goat and who is willing to trade one blanket for one goat. Obviously, this is much more difficult than simply going to Sears and paying cash for the blanket of your choice. Without money as the medium of exchange, less transactions take place.
Decreasing transactions hurt economic well being. For example, most transactions make both sellers and buyers better off. Sellers of pencils places more value on the money received than on the pencil; otherwise, he would not sell the good. Buyers get more benefit from the pencil bought than from the money; otherwise, he would not buy the pencil. Hyperinflation, by diminishing the number of deals cut, causes the economy to be less efficient, putting society inside the PPF.
QUESTIONS:
1. Define the production possibility frontier.
2. Is the economy operating at full efficiency when it is on the PPF?
3. Is the economy operating at full efficiency when it is inside the PPF?
4. Where is the economy when it has some unemployment?
5. Where is the economy when it is at full employment?
6. Where is the economy when it has inflation and is at full employment?
7. Where is the economy when it has inflation and some unemployment?
8. When an economy moves from one point of the PPF to another point on the PPF, what are the economic costs or gains to society?
9. When an economy moves from a point on the PPF to inside the PPF, what are the economic costs or gains to society?
10. When an economy moves from a point inside the PPF to a point on the PPF, what are the economic costs or gains to society?1‑ 2[v]
IV. POLICY ASSESSMENT
After you have studied this section, you will be able to:
A. Given a policy, assess whether or not it is efficient in terms of the ultimate objective of economics.
B. Be able to explain, if and why, the following are problems in terms of the bottom line of economic policy:
UNEMPLOYMENT
INFLATION
INCOME DISTRIBUTION
ECONOMIC GROWTH
A. Given a policy, be able to assess whether or not it is efficient in terms of the ultimate objective of economics.
From the definition of economics, we know that the ultimate objective of the study of economics is to find out how to optimize the utilization and allocation of scarce resources. Thus, the bottom line of economic policy is to optimize the utilization and allocation of resources.
We can use the PPF to assess whether economic policy is efficient. For example, the best economic policy would be if it...
puts society on the PPF and reflects the desires of society.
In this case, since society is on the PPF, all its resources are being fully used. And since the point selected on the PPF reflects the desires of society, then, assuming that the objective of policy is not only to fully employ resources but also to use them as the people see fit (indicated by the price‑budget line), the policy OPTIMIZES the allocation of scarce resources among competing uses.
Previewing what we will be covering later, in macroeconomics, the target is full employment equilibrium,D where all resources are employed and there is no inflation. Reaching full employment equilibrium puts us on the PPF. Microeconomic policies, which allow or encourage firms to operate where marginal cost equals price, will optimize the allocation of resources ‑‑ putting us on a point most advantageous to society. Efficient macroeconomic and microeconomic policies combine to form the ideal economic policy, putting society on the PPF at a point desired by society.U
An efficient, but not necessarily ideal, economic policy must, at the least, improveD the utilization of resources. In microeconomics, such policies should allow or encourage society to move closer to the point where price equals marginal cost. In macroeconomics, an efficient economic policy should move society closer to the PPF. If, however, another policy can do a better job, then this policy would not be economically efficient because of the "opportunity cost of the benefits foregone." The subject of opportunity cost, a key economic concept, will be discussed later.
Economic policies which worsen rather than improve resource utilization, or by moving prices away from marginal cost, by idling more resources or both, are unquestionably inefficient
B. Be able to explain, if and why, the following are problems in terms of the bottom line of economic policy:
UNEMPLOYMENT
INFLATION
INCOME DISTRIBUTION
ECONOMIC GROWTH
We have just discussed what is perhaps the single most important issue in economic analysis: the optimal utilization and allocation of scarce resources. Now we examine the issues of unemployment, inflation, income distribution and economic growth in light of the optimal utilization and allocation of resources ‑ the bottom line of economic analysis.
UNEMPLOYMENT: Optimal utilization of resources must necessarily have full employment of resources. Thus any unemployment of resources is less than optimal utilization of resources.
A major goal of macroeconomic policy is to reach full employment.
INFLATION: The problem with normal inflation (as opposed to hyperinflation) is redistribution of income from fixed income earners to those whose incomes move with price changes. In the short run, normal inflation, per se, does not affect how much resources are being used. By taking income away from fixed income earners, however, resources are taken away from society's poorer elements, increasing income distribution gaps. In the longer run, larger income distribution gaps can cause political instability, sometimes wars and revolutions, thereby adversely affecting resource utilization.
During periods of general price increases, some prices may rise faster than others. To the extent that these prices move away from their marginal cost of production, resource utilization will be worsened.
Maintaining stable prices or controlling inflation is another major goal of macroeconomic policy.
INCOME DISTRIBUTION: Uneven income distribution has caused many revolutions and continues to be a major threat to some developing economies. Thus, while short‑ run effects of uneven income distribution on optimum resource utilization are not obvious, sharp income and wealth differences between the rich and the poor can have potentially explosive effects on political stability.
For example, Mexico's most urgent problem is its uneven income distribution. While the United States' large middle class gives the country long‑term stability, even the world's richest country has some endemic income distribution problems.
Achieving more balanced income distribution is another major goal of macroeconomic policy.
ECONOMIC GROWTH: Enabling the economy to produce more through increased capital (machines and factories), better technology or better resource utilization ‑ expands the entire PPF. This is economic growth, which not only optimizes the utilization of current resources, but can improve future economic welfare.
Stimulating economic growth is the fourth major goal of macroeconomic policy.
In sum, the four major goals of macroeconomic policy are:
Full employment
Stable prices
Even income distribution
High economic growth
The achievement of any of these goals helps improve the utilization of resources. Unfortunately, as we will see in the next section, trying to reach some of these goals may make one or more of the other problems worse.
Before going on, an important announcement: Balancing the budget was not listed as a goal of macroeconomic policy. Suffice it to say here that because the macroeconomy has a feedback between consumption and national income, balancing the budget as a macroeconomic goal would tend to destabilize rather than stabilize the economy. We will come back to the budget balancing act later.
QUESTIONS
1. What is the bottom line of economic policy?
2. What are the four major issues of macroeconomics?
3. Why are unemployment, inflation, economic growth and income distribution issues in terms of the bottom line of economic policy?
4. Is it important for individuals to balance their budget? Why?
5. Is it important for a country to balance its budget? Why?
V. UNEMPLOYMENT VS. INFLATION
Section IV discussed the relation between the bottom line of economic analysis and the four objectives of macroeconomic policy: full employment, stable prices, even income distribution ,and strong economic growth. This section examines the relationship between two of these issues, unemployment and inflation.
After studying this section, you should be able to:
A. Recall and quantify the real cost to society of unemployment.
B. Recall the basic problem caused by normal inflation.
C. Be able to recall one method of preventing the income redistributing effect of inflation, but without the side of effect of increasing unemployment.
(Note especially the effect of unemployment of minorities, teenagers and new entrants into the market on income distribution.)
D. Be able to use the production possibility frontier to compare the social costs of unemployment versus inflation.
We have just seen that macroeconomic policy wants to achieve both full employment and stable prices. Unfortunately, trying to achieve one of these goals may make the other problem worse. For example, if the government tries to bring about full employment by increasing government spending, lowering taxes or dropping interest rates, inflation may rise. All of these actions will raise demand ‑‑ which, while contracting unemployment, will also raise inflation.
On the other hand, the government can try to fight inflation by lowering government spending, raising taxes or upping interest rates; all of these actions will drop demand ‑‑ which, while alleviating inflationary pressures, will increase unemployment.
Because of the possible tradeoff between unemployment and inflation, we must evaluate the relative economic costs of unemployment versus inflation. First, we know unemployment moves the economy away from the PPF, with real costs to society while normal inflation moves the economy from one point of the PPF to another point on the PPF. The first idles resources; the second redistributes resources.
Which of these problems, unemployment or inflation, costs society more? If resources are fully employed, their production can be redistributed, but idle resources take away from everyone in society ‑‑ the lost output cannot be recovered. For example, the average output per American worker is about $56,000/year and the U.S. labor force is about 130 million people. Thus, an unemployment rate of 5% translates into:
(EQ: 8) ... %UN * N = Nu
Nu =number of unemployed workers,
N = labor force
%UN = unemployment rate
(EQ: 9) ... Nu * $56,000 = value of production lost to society per year
(EQ: 10) ... 5% * 130 MILLION * $56,000 = $364 BILLION
Because of the real and substantial losses of unemployment, it would be better policy to maintain full employment and then design specific policies to better redistribute the resources. For example, indexing of fixed income payments to the rate of inflation can alleviate the adverse income distribution effect of inflation. Social security is now indexed to the rate of increase of consumer prices for exactly this reason.
Another problem with policies which raise unemployment while fighting inflation is that rising unemployment often affects income distribution even more adversely than inflation. The reason: the first people to be fired are usually new entrants to the labor markets and minorities, two of the poorest sectors of society. Since the major income distribution effect of inflation has been obviated with the indexing of social security payments, policies which attempt to fight inflation -‑ but which raise unemployment‑- will worsen income distribution.
The key detrimental effect of inflation is one of income distribution. Effective policies should specifically be aimed at solving this problem.D
In sum, unemployment, by idling resources, costs society more than inflation. Indexing of fixed incomes prevents the adverse income redistribution effects of inflation.
QUESTIONS
1. Compare in dollar terms the social costs of unemployment and inflation.
2. Inflation causes what basic economic problem?
3. How can the effect of inflation be countered without causing increased unemployment?
4. If the general unemployment rate rises, will the unemployment of new entrants to the market go up by a greater percentage? Why or why not?
5. Using the PPF, compare the social costs of unemployment and inflation.
Tuesday, September 15, 2009
Sunday, May 10, 2009
Partial Course Objectives - IBUS 592, " DOING BUSNESS IN CHINA"
COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
2. Recalling the reasons for the USG's definition of China
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
4. Analyzing the logic of the USG's definition of China
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
6. Recalling our definition of Greater China.
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
2. Recalling the reasons for the USG's definition of China
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
4. Analyzing the logic of the USG's definition of China
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
6. Recalling our definition of Greater China.
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
Wednesday, May 6, 2009
Course objectives
COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
China is the prc, the roc and hk
And the prc government is the only government of china
2. Recalling the reasons for the USG's definition of China\
Reality check
Fear of the cold war or the soviet union
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
Usg – ait (American institute in Taiwan) aka American embassy in tapei
Report of us-roc s&T accord – six hours
Spies in the embassy
Prc – trade show brochure
Offices in Taipei, Bangkok, kuala lumpur, hk,
Couldn’t be used
Roc – calls its ambassador in the us, the representative even in their own conversations and secret memos
Calls their embassy teco
4. Analyzing the logic of the USG's definition of China
Reality check doesn’t check out.
The soviet union no longer exists
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
No change in policies even thought the soviet union broke up in 1991
6. Recalling our definition of Greater China.
Roc, prc and hk
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
In a service jv (like an office,$200,000) signing in the old section of the Beijing hotel
The lady next to me was a lawyer
5 years for the negotiations of the jv
Single, married, 3 kids
Prc
\
Hk – mel searls got a business license, rented an office, hired a secretary and put in a phone in the morning,
In the afternoon he was in business as the rep for dravo in 1982
Roc $50 million jv by ge to make turbines approved in 2 weeks.
One stop investment center
Foreign exchange fund
$500 million
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
Prc roc hk sr
Prc roc hk lr
Prc is now the us’s second largest supplier of imports
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Beijing in china
Beijing or peking in hk
Bei ping or northern plains in Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization 7000 yeaars
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
Books – 3 kingdoms, sun zi “art of war,” “confucian analects”
The king is the leader
To understand why Chinese do what they do now, know Chinese history
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
Slows them down
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
Have a schedule and don’t lie
Point out the opportunity cost of delay
Eg. $100 million project with roi of 10%
One year of delay = $10 million in forgone profits
Contract like in construction – penalty (surcharge) for late finish, discounts for early finishes
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
SKIP 2. Be able to recall 5 general business implications of the differences in China's 3 economic systems
APPROVALS
SPEED OF DOING BUSINESS
DEALING WITH BUREAUCRATS
OWNERSHIP
HOW DO YOU DEAL WITH BUREAUCRATS?
SPEED OF DOING BUSINESS
IN THE PRC
SKIP 1 THROUGH 131. All Deals Are Cut With Bureaucrats, Not Businesses.
2. China Is A Centrally Controlled Economy
THE 5-YEAR PLAN
3. China Is A Poor Country
4. China Wants To Modernize
THE FOUR MODERNIZATIONS
5. China Is New To International Trade
6. China Is A Sophisticated Society With Many Thousand Years Of History And Culture.
7. Higher Education Is Scarce
8. China Is A Large Country
9. China Has High Tariffs
10. China Has Non‑tariff Barriers
11. China Has Stop And Go Policies.
12. China's Infrastructure Is Inadequate
13. Chinese Economic Law Is Relatively New
I
Date: may
Xxxbegin April 23, 2008
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE รจ
P UP Q UP AND PROFITS UPD รจ INVESTMENT UP รจK/L (CAPITAL/LABOR RATIO) UP รจ PRODUCTIONS COSTS DOWN รจSUPPLY UP รจ
P DOWN Q UP AND PROFITS UP รจ ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $50/YEAR/PERSON
8.5 MILLION PEOPLE
$425 MILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY MORE THAN 4000 TIMES.
SO DEMAND UP รจP UP, Q UP, PROFITS UP รจI UP รจD UP MORE
AD = C+I+G+X
DOMESTIC COSTS LOW, INTERNATIONAL HIGH รจ PROFITS HIGH
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP รจK/L UP (CAPITAL LABOR RATIO)รจ COST OF PRODUCTION DOWN รจSUPPLY UP (OR SHIFT TO THE RIGHT)รจP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT รจPROFITS UP รจI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
5. Given data on China's resources, state what types of products should be traded among China's 3 economies and with the United States.
6. Be able to explain, using international trade's principle of comparative advantage, why each of China's 3 economies should produce and export what products.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
14. Be able to recall the business implications resulting from our analysis of economic development of the three economies of greater China.
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
China is the prc, the roc and hk
And the prc government is the only government of china
2. Recalling the reasons for the USG's definition of China\
Reality check
Fear of the cold war or the soviet union
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
Usg – ait (American institute in Taiwan) aka American embassy in tapei
Report of us-roc s&T accord – six hours
Spies in the embassy
Prc – trade show brochure
Offices in Taipei, Bangkok, kuala lumpur, hk,
Couldn’t be used
Roc – calls its ambassador in the us, the representative even in their own conversations and secret memos
Calls their embassy teco
4. Analyzing the logic of the USG's definition of China
Reality check doesn’t check out.
The soviet union no longer exists
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
No change in policies even thought the soviet union broke up in 1991
6. Recalling our definition of Greater China.
Roc, prc and hk
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
In a service jv (like an office,$200,000) signing in the old section of the Beijing hotel
The lady next to me was a lawyer
5 years for the negotiations of the jv
Single, married, 3 kids
Prc
\
Hk – mel searls got a business license, rented an office, hired a secretary and put in a phone in the morning,
In the afternoon he was in business as the rep for dravo in 1982
Roc $50 million jv by ge to make turbines approved in 2 weeks.
One stop investment center
Foreign exchange fund
$500 million
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
Prc roc hk sr
Prc roc hk lr
Prc is now the us’s second largest supplier of imports
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Beijing in china
Beijing or peking in hk
Bei ping or northern plains in Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization 7000 yeaars
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
Books – 3 kingdoms, sun zi “art of war,” “confucian analects”
The king is the leader
To understand why Chinese do what they do now, know Chinese history
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
Slows them down
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
Have a schedule and don’t lie
Point out the opportunity cost of delay
Eg. $100 million project with roi of 10%
One year of delay = $10 million in forgone profits
Contract like in construction – penalty (surcharge) for late finish, discounts for early finishes
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
SKIP 2. Be able to recall 5 general business implications of the differences in China's 3 economic systems
APPROVALS
SPEED OF DOING BUSINESS
DEALING WITH BUREAUCRATS
OWNERSHIP
HOW DO YOU DEAL WITH BUREAUCRATS?
SPEED OF DOING BUSINESS
IN THE PRC
SKIP 1 THROUGH 131. All Deals Are Cut With Bureaucrats, Not Businesses.
2. China Is A Centrally Controlled Economy
THE 5-YEAR PLAN
3. China Is A Poor Country
4. China Wants To Modernize
THE FOUR MODERNIZATIONS
5. China Is New To International Trade
6. China Is A Sophisticated Society With Many Thousand Years Of History And Culture.
7. Higher Education Is Scarce
8. China Is A Large Country
9. China Has High Tariffs
10. China Has Non‑tariff Barriers
11. China Has Stop And Go Policies.
12. China's Infrastructure Is Inadequate
13. Chinese Economic Law Is Relatively New
I
Date: may
Xxxbegin April 23, 2008
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE รจ
P UP Q UP AND PROFITS UPD รจ INVESTMENT UP รจK/L (CAPITAL/LABOR RATIO) UP รจ PRODUCTIONS COSTS DOWN รจSUPPLY UP รจ
P DOWN Q UP AND PROFITS UP รจ ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $50/YEAR/PERSON
8.5 MILLION PEOPLE
$425 MILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY MORE THAN 4000 TIMES.
SO DEMAND UP รจP UP, Q UP, PROFITS UP รจI UP รจD UP MORE
AD = C+I+G+X
DOMESTIC COSTS LOW, INTERNATIONAL HIGH รจ PROFITS HIGH
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP รจK/L UP (CAPITAL LABOR RATIO)รจ COST OF PRODUCTION DOWN รจSUPPLY UP (OR SHIFT TO THE RIGHT)รจP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT รจPROFITS UP รจI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
5. Given data on China's resources, state what types of products should be traded among China's 3 economies and with the United States.
6. Be able to explain, using international trade's principle of comparative advantage, why each of China's 3 economies should produce and export what products.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
14. Be able to recall the business implications resulting from our analysis of economic development of the three economies of greater China.
Wednesday, April 22, 2009
ADDITIONAL MATERIALS FOR 59201 AND 59202 TESTS
BELOW WILL BE ADDED TO BLOG FOR 592 01 AND 592 02 TEST
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
SKIP 12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
END OF NEW MATERIALS
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
SKIP 12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
END OF NEW MATERIALS
WHAT THE NEXT TEST WILL COVER
The April 22nd posting is what the next test will cover. The last test covered through philosophies.
glee
glee
WHAT THE NEXT TEST WILL COVER
OUR LAST TEST COVERED THROUGH GREATER CHINA’S PHILOSOPHIES
BELOW ARE THE OBJECTIVES OF WHAT WILL BE COVERED IN THE NEXT TEST ON MONDAY APIRL 27.
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE รจ
P UP Q UP AND PROFITS UPD รจ INVESTMENT UP รจK/L (CAPITAL/LABOR RATIO) UP รจ PRODUCTIONS COSTS DOWN รจSUPPLY UP รจ
P DOWN Q UP AND PROFITS UP รจ ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $200/YEAR/PERSON
8.5 MILLION PEOPLE
$1.7 BILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY 1146 TIMES.
SO DEMAND UP รจP UP, Q UP, PROFITS UP รจI UP รจD UP MORE
(SINCE AD = C+I+G+X, THEN IF I UP, AD UP)
DOMESTIC COSTS LOW, INTERNATIONAL HIGH รจ PROFITS HIGH, SALES INCREASE รจ INVESTMENT UP
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP รจK/L UP (CAPITAL LABOR RATIO)รจEFFICIENCY UP รจ COST OF PRODUCTION DOWN รจSUPPLY UP (OR SHIFT TO THE RIGHT)รจP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT รจPROFITS UP รจI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
E.G. TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
E.G. 8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
BELOW ARE THE OBJECTIVES OF WHAT WILL BE COVERED IN THE NEXT TEST ON MONDAY APIRL 27.
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE รจ
P UP Q UP AND PROFITS UPD รจ INVESTMENT UP รจK/L (CAPITAL/LABOR RATIO) UP รจ PRODUCTIONS COSTS DOWN รจSUPPLY UP รจ
P DOWN Q UP AND PROFITS UP รจ ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $200/YEAR/PERSON
8.5 MILLION PEOPLE
$1.7 BILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY 1146 TIMES.
SO DEMAND UP รจP UP, Q UP, PROFITS UP รจI UP รจD UP MORE
(SINCE AD = C+I+G+X, THEN IF I UP, AD UP)
DOMESTIC COSTS LOW, INTERNATIONAL HIGH รจ PROFITS HIGH, SALES INCREASE รจ INVESTMENT UP
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP รจK/L UP (CAPITAL LABOR RATIO)รจEFFICIENCY UP รจ COST OF PRODUCTION DOWN รจSUPPLY UP (OR SHIFT TO THE RIGHT)รจP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT รจPROFITS UP รจI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
E.G. TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
E.G. 8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
Monday, April 13, 2009
Course objectives
Below are course objectives to date. We have discussed most of them in class. If you have any questions, it is best to ask them in class. You can also ask by email.
COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
2. Recalling the reasons for the USG's definition of China
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
4. Analyzing the logic of the USG's definition of China
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
6. Recalling our definition of Greater China.
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
2. Recalling the reasons for the USG's definition of China
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
4. Analyzing the logic of the USG's definition of China
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
6. Recalling our definition of Greater China.
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
Friday, April 10, 2009
59201 april 8
TAKE ROLL
GROUP PRESENTATION
REVIEW General and Specific Business implications
PAPERS – SOME EXCELLENT ANALYSIS:
BE SURE TO PUT INTO SUBJECT LINE:
592 – SECTION #, PAPER #
THOUGHT OF THE DAY “GOOD ETHICS IS GOOD BUSINESS”
NEW: Continue specific business implicatons
Final exam MW 1310-1425 Friday May 22nd 10:45-1:15pm ROOM bus 107
POLITICAL SYSTEMS
China's political systems.
the political systems in Taiwan, mainland China and Hong Kong
a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
recent developments in the political systems of Taiwan, mainland China and Hong Kong
why personality cults are still possible in countries which have been influenced by Chinese culture
3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
Begin here
MOFERT JING MAO BU
(ECONOMIC/TRADE)
MINISTRY OF COMMERCE
SUN PEI ZHENG
THE PAPERS GOT IN THE WRONG PILE
2 PILES (2 APPROVALS)
FACTORY LEVELS
CITY LEVELS
PROVINCIAL LEVELS
MINISTRY LEVELS
MOFERT LEVELS (JING MAO)
IF LARGER
THEN STATE ECONOMIC COMMISSION
NOW IN STATE PLANNING COMMISSION
IF LARGER
THEN STATE COUNCIL LEVELS
(OFFICE OF THE PREMIER)
IF LARGER THAN $50 MILLION THEN NATIONAL PEOPLE’S CONGRESS (NPC).
NEXT ONE GOING THROUGH THE SAME LEVELS IS FOR PAYMENT
(2) MOFERT and payment
NEXT MONDAY HERE
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
NEXT TEST APRIL 29
GROUP PRESENTATION
REVIEW General and Specific Business implications
PAPERS – SOME EXCELLENT ANALYSIS:
BE SURE TO PUT INTO SUBJECT LINE:
592 – SECTION #, PAPER #
THOUGHT OF THE DAY “GOOD ETHICS IS GOOD BUSINESS”
NEW: Continue specific business implicatons
Final exam MW 1310-1425 Friday May 22nd 10:45-1:15pm ROOM bus 107
POLITICAL SYSTEMS
China's political systems.
the political systems in Taiwan, mainland China and Hong Kong
a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
recent developments in the political systems of Taiwan, mainland China and Hong Kong
why personality cults are still possible in countries which have been influenced by Chinese culture
3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
Begin here
MOFERT JING MAO BU
(ECONOMIC/TRADE)
MINISTRY OF COMMERCE
SUN PEI ZHENG
THE PAPERS GOT IN THE WRONG PILE
2 PILES (2 APPROVALS)
FACTORY LEVELS
CITY LEVELS
PROVINCIAL LEVELS
MINISTRY LEVELS
MOFERT LEVELS (JING MAO)
IF LARGER
THEN STATE ECONOMIC COMMISSION
NOW IN STATE PLANNING COMMISSION
IF LARGER
THEN STATE COUNCIL LEVELS
(OFFICE OF THE PREMIER)
IF LARGER THAN $50 MILLION THEN NATIONAL PEOPLE’S CONGRESS (NPC).
NEXT ONE GOING THROUGH THE SAME LEVELS IS FOR PAYMENT
(2) MOFERT and payment
NEXT MONDAY HERE
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
NEXT TEST APRIL 29
UNOFFICIAL EARTHQUAKE TOLLS REMOVED
According to the Epoch Times:
An unofficial figure based on incomplete statistics (collected up to the end of April 2) showed that over 4,100 students died in the earthquake. However, this figure was removed from the Internet (the limited sites available in mainland China) on April 3.
note: The Epoch Times is independent of the Chinese government and is published in the US.
An unofficial figure based on incomplete statistics (collected up to the end of April 2) showed that over 4,100 students died in the earthquake. However, this figure was removed from the Internet (the limited sites available in mainland China) on April 3.
note: The Epoch Times is independent of the Chinese government and is published in the US.
THEMES OF THE WEEK
Theme of the week:
WEEK: THEME
1: Definition of China
2: Necessary conditions for International Business
3: Chinese culture: art, history
4: Chinese language –
5: Chinese philosophy
Great leap forward
Cultural revolution
6: Political System in Taiwan
7. Political System in Hong Kong group 5 or?
8. Political System in Mainland China
9. Economic system in Taiwan
10. Economic system in Hong Kong
11. Economic system in Mainland China
12. Business venture in Taiwan
13. Business venture in Hong Kong
14. Business venture in Mainland China
WEEK: THEME
1: Definition of China
2: Necessary conditions for International Business
3: Chinese culture: art, history
4: Chinese language –
5: Chinese philosophy
Great leap forward
Cultural revolution
6: Political System in Taiwan
7. Political System in Hong Kong group 5 or?
8. Political System in Mainland China
9. Economic system in Taiwan
10. Economic system in Hong Kong
11. Economic system in Mainland China
12. Business venture in Taiwan
13. Business venture in Hong Kong
14. Business venture in Mainland China
Wednesday, March 11, 2009
SOME NUMBERS FROM CLASS NOTES FOR NEXT EXAM
623 BC.
Begin here on Wednesday march 12
compare Buddhism with Taoism and Confucianism
an important theoretical aspect of Buddhism
EVERYTHING IS EMPTINESS
NOTHING IS REAL
THE METAPHYSICAL
LIFE AFTER LIFE BY RAYMOND MOODY JR.
the meaning of Karma
CAUSE EFFECT
CAUSES EFECTS
the basic philosophical foundation of Buddhism
THE QI OR THE METAPHYSICAL
how a Buddhist would maximize his "profits"
OFFICIAL PRC DATA
NOT RELIABLE
WHY DO YOU NEED TO KNOW?
IF YOU WANT TO MAKE GOOD BUSINESS DECISIONS, YOU NEED
LOTS OF RELIABLE INFORMATION
BEGINNING 1949 – GROWTH EXAGERRATED
REAL GDP GROWTH ABOUT 13%/YEAR
GREAT LEAP FOWARD
1958 22.3% OFFICIAL GDP GROWTH; WHAT WAS IT ACTUALLY?
1966-76
5%/YEAR GROWTH IN REAL GDP
PRICES DOWN/ GDP UP
P DOWN Q UP รจ WHAT HAPPENED? MADE UP STATISTICS
1985 – ACCORDING TO USGOVERNMENT REPORT
SHENZHEN SEZ
IN FIRST 5 YEARS
$1.2 BILLION INVESTMENT
?
THIS APPOVED INVESTMENT
ACTUAL INVESTMENT WAS 17%
.17*$1.2 BILLION = $204 MILLION
OF THIS AMOUNT 20% IN MANUFACTURING
$40.8 MILLION
FOUR MODERNIZATONS - ASIM
FROM JUNE 1978 TO JUNE 1983
IN 1997-1998
17% INCREASE IN REAL GDP
-2.1% IN ENERGY USE
LATEST – PRC STATE STATISTICS BUREAU COMPLAINING THAT PROVINCIAL DATA IS NOT RELIABLE
TEST UP TO HERE FROM THE END OF CONFUCIANIST THOUGHT OR STARTING FROM DAOIST THUGHT
Begin here on Wednesday march 12
compare Buddhism with Taoism and Confucianism
an important theoretical aspect of Buddhism
EVERYTHING IS EMPTINESS
NOTHING IS REAL
THE METAPHYSICAL
LIFE AFTER LIFE BY RAYMOND MOODY JR.
the meaning of Karma
CAUSE EFFECT
CAUSES EFECTS
the basic philosophical foundation of Buddhism
THE QI OR THE METAPHYSICAL
how a Buddhist would maximize his "profits"
OFFICIAL PRC DATA
NOT RELIABLE
WHY DO YOU NEED TO KNOW?
IF YOU WANT TO MAKE GOOD BUSINESS DECISIONS, YOU NEED
LOTS OF RELIABLE INFORMATION
BEGINNING 1949 – GROWTH EXAGERRATED
REAL GDP GROWTH ABOUT 13%/YEAR
GREAT LEAP FOWARD
1958 22.3% OFFICIAL GDP GROWTH; WHAT WAS IT ACTUALLY?
1966-76
5%/YEAR GROWTH IN REAL GDP
PRICES DOWN/ GDP UP
P DOWN Q UP รจ WHAT HAPPENED? MADE UP STATISTICS
1985 – ACCORDING TO USGOVERNMENT REPORT
SHENZHEN SEZ
IN FIRST 5 YEARS
$1.2 BILLION INVESTMENT
?
THIS APPOVED INVESTMENT
ACTUAL INVESTMENT WAS 17%
.17*$1.2 BILLION = $204 MILLION
OF THIS AMOUNT 20% IN MANUFACTURING
$40.8 MILLION
FOUR MODERNIZATONS - ASIM
FROM JUNE 1978 TO JUNE 1983
IN 1997-1998
17% INCREASE IN REAL GDP
-2.1% IN ENERGY USE
LATEST – PRC STATE STATISTICS BUREAU COMPLAINING THAT PROVINCIAL DATA IS NOT RELIABLE
TEST UP TO HERE FROM THE END OF CONFUCIANIST THOUGHT OR STARTING FROM DAOIST THUGHT
Monday, March 9, 2009
VIDEOS ABOUT GREAT LEAP FORWARD AND CULTURAL REVOLUTION
We showed a video in class which what actually happened in the Great Leap Forward and the Cultural Revolustion. For more information students should check out articles about the Great Leap Forward and the Cultural Revolution.
The videos are very special since they show actual movies of what happened during these times and since almost no one outside or inside China have seen these movies. Of course many people in China lived in those times. But what they tell us just become stories. I wanted you students to see for yourselves what actually happened.
One lesson that I want you to learn is that the official statistics of all governments should be questioned. In Mainland China, the exaggeration and flat-out lies about the statistics are amply illustrated by these videos. Communism, in China or elsewhere has not been efficient economically. To make communism seem to be efficient economically, many communist governments have exaggerated or false official statistics. The Chinese Communist Government is no exception.
To make efficient business decisions, you must have lots of reliable information. In China, getting reliable information is especially difficult, since official statistics are highly unreliable.
On the next test, there will be two questions about what the videos showed about the Great Leap Forward and the Cultural Revolution.
The videos are very special since they show actual movies of what happened during these times and since almost no one outside or inside China have seen these movies. Of course many people in China lived in those times. But what they tell us just become stories. I wanted you students to see for yourselves what actually happened.
One lesson that I want you to learn is that the official statistics of all governments should be questioned. In Mainland China, the exaggeration and flat-out lies about the statistics are amply illustrated by these videos. Communism, in China or elsewhere has not been efficient economically. To make communism seem to be efficient economically, many communist governments have exaggerated or false official statistics. The Chinese Communist Government is no exception.
To make efficient business decisions, you must have lots of reliable information. In China, getting reliable information is especially difficult, since official statistics are highly unreliable.
On the next test, there will be two questions about what the videos showed about the Great Leap Forward and the Cultural Revolution.
DETAILS OF SOME TEST1 ANSWERS
From the first test, we found that some people had problem with the US Government’s definition of China, which is China is Mainland China, Hong Kong and Taiwan. And the PRC government is the only legitimate government of China. So, there are two parts of the US government’s definition of China
The class’s definition of Greater China is simply the three economies of Mainland China, Hong Kong and Taiwan. This definition is correct, since we are talking about doing business in the economies of Greater China. We do substantial amounts of business with all three economies of China and, because of the different systems in these three economies, doing business in these three economies is different. This is the reason that our definition of Greater China is correct.
The US government’s definition of China is incorrect for two reasons. The first reason is that the PRC government does not govern Taiwan. Taiwan is governed by the government of the Republic China. This is the so-called reality check. Thus, the reality check does not check out. The second reason is that the real reason for the US government’s definition of China is the Soviet Threat. The US government has been concerned about nuclear war with the former Soviet Union since 1945. However, this reason is no longer relevant, since the Soviet Union no longer exists. Hence, the US government’s definition of China is incorrect because of the two reasons.
Confucius said, “Name correct, words flow.” We turn this around a bit and say, “Name incorrect, words don’t flow.” Because the US government definition of China is incorrect, then actions by the US government, the PRC government and the ROC government are strange. For example, the US government calls its embassy in Taipei, the American Institute in Taiwan.
The ROC government, for examples, calls its embassy in the US, TECO or the Taipei Economic and Cultural Office and calls its ambassador to t he US the “Representative,” even in their own secret documents. The PRC government, which really insisted that the US government adopt this wrong definition of China, did not allow a US company to use its brochure in a trade show because the US company said in its brochure, “We have offices in Singapore, Kuala Lumpur, Bangkok, Hong Kong and Taipei.” The customs officer, a Mr. Chen said, if you put Hong Kong and Taipei in the same column as the other places, you are implying that Hong Kong and Taiwan are separate from Mainland china. This was in 1985, when Hong Kong was still a British colony (12 years before the PRC’s takeover of Hong Kong on July 1, 1997) and Taiwan, which was and still is separate from Mainland China. These actions are strange and often time wasting actions because, “Ming Bu Zheng, Yan Bu Shun” (name incorrect, words don’t flow).
One of the key problems with doing business in Mainland China is that doing business there is much too slow. So, to speed up doing business there,
1. Make lots of friends,
2. Learn the language,
3. Have a schedule and never lie (have a ticket to show that you are leaving on the date you say you are leaving,
4. Point out the opportunity cost of slow negotiations. To show that you understand what this means, you should cite an example, such as a $50 million 50/50 joint venture with a roi (return on investment of 20%). Then every year of negotiation would cost each partner $10 million.
5. Have a construction like contract. For example if negotiations are quick (e.g. less than 3 months), the give a 10% discount. If negotiations are slow (e.g. 6 months to a year) add a surcharge of 10%. If the project is priced at $10 million, the discount would be $1 million and the surcharge would be $1 million.
In using examples to illustrate differences in doing business in the 3 economies, in 1985, a service joint venture signing in the old section of the Beijing Hotel took 5 years. The lawyer negotiating the jv was single at the beginning of negotiations, got married and had 3 kids by the time the negotiations were finished. She had triplets.
A similar office in Hong Kong in 1982 was opened in four hours. Mel Searls rented an office, had a phone put in, hired a secretary and to a business license, all in one morning. By the afternoon he was in business as the representative for Dravo.
In Taiwan, a $50 million jv with GE for manufacturing turbines was approved in 2 weeks in 1982.
These examples illustrate the relative speeds of doing business in these three economies. The details in the examples give you creditability when you are discussing business conditions with your clients or your perspective employers.
You can use these examples, until you have your own, better examples … the more details the better. While business conditions may have changed in the last 20 years, the relative speeds of doing business have not changed much.
Also, the business climate in Mainland China is still not very good. For example a survey conducted about 25 years ago showed that only 20% of Taiwan investors in Mainland China were making money. A 2008 survey shoed tht only 10% of Taiwan investors were making money in Mainland China. A 2009 survey showed that only 33% of all investors in Mainland China. The lesson from this is that while changes will usually take place, those changes may be improvements or may be worsening of the business climates.
The above give you some details that some students did not have or remember. These examples were discussed in class. If you attend the classes, you must take notes on these. If you don’t attend classes, you are still responsible for knowing these examples.
The class’s definition of Greater China is simply the three economies of Mainland China, Hong Kong and Taiwan. This definition is correct, since we are talking about doing business in the economies of Greater China. We do substantial amounts of business with all three economies of China and, because of the different systems in these three economies, doing business in these three economies is different. This is the reason that our definition of Greater China is correct.
The US government’s definition of China is incorrect for two reasons. The first reason is that the PRC government does not govern Taiwan. Taiwan is governed by the government of the Republic China. This is the so-called reality check. Thus, the reality check does not check out. The second reason is that the real reason for the US government’s definition of China is the Soviet Threat. The US government has been concerned about nuclear war with the former Soviet Union since 1945. However, this reason is no longer relevant, since the Soviet Union no longer exists. Hence, the US government’s definition of China is incorrect because of the two reasons.
Confucius said, “Name correct, words flow.” We turn this around a bit and say, “Name incorrect, words don’t flow.” Because the US government definition of China is incorrect, then actions by the US government, the PRC government and the ROC government are strange. For example, the US government calls its embassy in Taipei, the American Institute in Taiwan.
The ROC government, for examples, calls its embassy in the US, TECO or the Taipei Economic and Cultural Office and calls its ambassador to t he US the “Representative,” even in their own secret documents. The PRC government, which really insisted that the US government adopt this wrong definition of China, did not allow a US company to use its brochure in a trade show because the US company said in its brochure, “We have offices in Singapore, Kuala Lumpur, Bangkok, Hong Kong and Taipei.” The customs officer, a Mr. Chen said, if you put Hong Kong and Taipei in the same column as the other places, you are implying that Hong Kong and Taiwan are separate from Mainland china. This was in 1985, when Hong Kong was still a British colony (12 years before the PRC’s takeover of Hong Kong on July 1, 1997) and Taiwan, which was and still is separate from Mainland China. These actions are strange and often time wasting actions because, “Ming Bu Zheng, Yan Bu Shun” (name incorrect, words don’t flow).
One of the key problems with doing business in Mainland China is that doing business there is much too slow. So, to speed up doing business there,
1. Make lots of friends,
2. Learn the language,
3. Have a schedule and never lie (have a ticket to show that you are leaving on the date you say you are leaving,
4. Point out the opportunity cost of slow negotiations. To show that you understand what this means, you should cite an example, such as a $50 million 50/50 joint venture with a roi (return on investment of 20%). Then every year of negotiation would cost each partner $10 million.
5. Have a construction like contract. For example if negotiations are quick (e.g. less than 3 months), the give a 10% discount. If negotiations are slow (e.g. 6 months to a year) add a surcharge of 10%. If the project is priced at $10 million, the discount would be $1 million and the surcharge would be $1 million.
In using examples to illustrate differences in doing business in the 3 economies, in 1985, a service joint venture signing in the old section of the Beijing Hotel took 5 years. The lawyer negotiating the jv was single at the beginning of negotiations, got married and had 3 kids by the time the negotiations were finished. She had triplets.
A similar office in Hong Kong in 1982 was opened in four hours. Mel Searls rented an office, had a phone put in, hired a secretary and to a business license, all in one morning. By the afternoon he was in business as the representative for Dravo.
In Taiwan, a $50 million jv with GE for manufacturing turbines was approved in 2 weeks in 1982.
These examples illustrate the relative speeds of doing business in these three economies. The details in the examples give you creditability when you are discussing business conditions with your clients or your perspective employers.
You can use these examples, until you have your own, better examples … the more details the better. While business conditions may have changed in the last 20 years, the relative speeds of doing business have not changed much.
Also, the business climate in Mainland China is still not very good. For example a survey conducted about 25 years ago showed that only 20% of Taiwan investors in Mainland China were making money. A 2008 survey shoed tht only 10% of Taiwan investors were making money in Mainland China. A 2009 survey showed that only 33% of all investors in Mainland China. The lesson from this is that while changes will usually take place, those changes may be improvements or may be worsening of the business climates.
The above give you some details that some students did not have or remember. These examples were discussed in class. If you attend the classes, you must take notes on these. If you don’t attend classes, you are still responsible for knowing these examples.
Sunday, March 1, 2009
WEEK OF MARCH 1, 2009 - VIDEO
As you watch the video, remember the following dates:
1949 – beginning of Communism takeover in Mainland China
1958 – beginning of Great Leap Forward
1966 – beginning of cultural revolution
1976 end of cultural revolution
1978 – beginning of economic reforms
Look for:
backyard furnances
weighing of slag
promises of rice crops
planting of rice
data on number of deaths
1949 – beginning of Communism takeover in Mainland China
1958 – beginning of Great Leap Forward
1966 – beginning of cultural revolution
1976 end of cultural revolution
1978 – beginning of economic reforms
Look for:
backyard furnances
weighing of slag
promises of rice crops
planting of rice
data on number of deaths
Monday, February 23, 2009
Agenda Feb 16 - 59203
On February 16, BEGIN WITH HISTORY
the age of the Chinese civilization
3 examples showing the importance of Chinese history in understanding present day China
how DOES the length of Chinese history affect negotiations in mainland China today
3 ways to accelerate negotiation in mainland China
ART
2 reasons why Chinese art objects can be profitably traded in the United States
two importance differences between Chinese art and Western art
PHILOSOPHIES
China's three major philosophies
compare communism to religions
why IS understanding Chinese philosophies important for doing business with China
Confucianis Thought
When born
To Govern a great commonwealth … choose
What is the basis for ren
Jun zi (gentleman)
Ren is most efficient behavior
Two quotes from the Confucian Analects
What is the first phrase in the Confucian Analects?
What is the Confucian Analects?
When was he born?
What is the basis of Confucianist Thought?
How would the modern Confucianist treat his workers?
… his boss?
… his colleagues
Would Confucianist thought be applicable today?
Why or why not?
Up to here for the exam
the age of the Chinese civilization
3 examples showing the importance of Chinese history in understanding present day China
how DOES the length of Chinese history affect negotiations in mainland China today
3 ways to accelerate negotiation in mainland China
ART
2 reasons why Chinese art objects can be profitably traded in the United States
two importance differences between Chinese art and Western art
PHILOSOPHIES
China's three major philosophies
compare communism to religions
why IS understanding Chinese philosophies important for doing business with China
Confucianis Thought
When born
To Govern a great commonwealth … choose
What is the basis for ren
Jun zi (gentleman)
Ren is most efficient behavior
Two quotes from the Confucian Analects
What is the first phrase in the Confucian Analects?
What is the Confucian Analects?
When was he born?
What is the basis of Confucianist Thought?
How would the modern Confucianist treat his workers?
… his boss?
… his colleagues
Would Confucianist thought be applicable today?
Why or why not?
Up to here for the exam
Agenda feb 18 59201
agenda
59201 – feb 18
test next Monday, to cover up to what we cover this Wednesday
e.g.
What is the usg’s definition of china?
Ans:
attendance
articles
groups
update on book – taking a long time
CHECK http://leespeaking.blogspot.com/
themes of the weeks
PRESENTATION
ARTICLES
schedule of exams
continue discussions
PHILOSOPHIES
China's three major philosophies
compare communism to religions
why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
two qualifications
two quotes from ConfuciAN Analects
when Confucius was born
test up to here…
59201 – feb 18
test next Monday, to cover up to what we cover this Wednesday
e.g.
What is the usg’s definition of china?
Ans:
attendance
articles
groups
update on book – taking a long time
CHECK http://leespeaking.blogspot.com/
themes of the weeks
PRESENTATION
ARTICLES
schedule of exams
continue discussions
PHILOSOPHIES
China's three major philosophies
compare communism to religions
why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
two qualifications
two quotes from ConfuciAN Analects
when Confucius was born
test up to here…
Agenda feb 18 59202
feb18 59202
how the modern Confucius would treat his boss
how modern Confucius would treat his employee
how Confucius would treat his colleagues
one explanation of "Jen" (ren)
jun zi
whether Confucianist ethics would be applicable in today's society
test up to here
how the modern Confucius would treat his boss
how modern Confucius would treat his employee
how Confucius would treat his colleagues
one explanation of "Jen" (ren)
jun zi
whether Confucianist ethics would be applicable in today's society
test up to here
Sunday, February 22, 2009
UPDATE TO DOING BUSINESS IN GREATER CHINA
According to the article, only about one-third of multinational corporations have ever made a profit in China.
UPDATE 2006
http://www.businessweek.com/smallbiz/content/jan2006/sb20060105_958312.htm
culture
Http://www.legacee.com/Culture/CultureOverview.html
Xinhua’s new ban to be nothing more than a useless power play spurred on by China’s communist bureaucracy, which has become accustomed to freely manipulating public policy. This ridiculous notion will not however survive under WTO supervision, a powerful force which will ensure that free financial information flow will continue to provide growing Chinese firms the elemental foundations for expansion and opportunity, factors which will ultimately enrich the Chinese population providing more jobs and economic prosperity.
Source Article: http://www.ft.com/cms/s/0/4a335dda-e8c4-11dc-913a0000779fd2ac.html
The main implication of doing business in China that we discussed in class that relates to some of the topics from this article is that China was then and still is a communist country.
Website: http://www.amanet.org/editorial/chinabusiness.htm
B. The business lesson here is that learning what the culture, traditions, market research, etc. is not always enough to break into any industry in Greater China. There is an awful bureaucratic system that takes place in order to establish there.
article link:
http://www.doingbusiness.org/ExploreTopics/StartingBusiness/Details.aspx?economyid=42
“Conditions at Chinese toy factories called 'brutal'”, by David Barboza, this article is about the Chinese work conditions in toy manufacturing. Many companies were under investigation due to the illegal treatment of employees. The companies in China are well known in the United States, even though the factories mistreating the workers, companies in the US continued to do business with them. “...brutal conditions" and illegal practices that exist in Chinese toy factories, many of which supply some of the world's biggest brand name toy makers, including Disney, Hasbro and Sega”.
http://www.iht.com/articles/2007/08/21/business/toyside.php
The article emphasizes how crucial it is to research foreign partners and how U.S.
Department of Commerce offices in Beijing, Chengdu, Guangzhou, Shanghai,
Shenyang, and Hong Kong can provide lists of local business service providers,
consultants, and law firms.
(http://www.buyusa.gov/pittsburgh/adviceforchina.html)
After 1978, his successor DENG Xiaoping and other leaders focused on market-oriented economic development and by 2000 output had quadrupled. For much of the population, living standards have improved dramatically and the room for personal choice has expanded, yet political controls remain tight.
STATE AND CIA PRIMARILy USE OFFIICIAL DATA; so 'dramatic improvement" is questionable. Better than before. true; drmatic? questionable.
http://globaledge.msu.edu/countryInsights/country.asp?countryID=17®ionID=3
However, despite spectacular economic growth, exports, and inward investment, China's business climate still remains patchy for foreign companies, according to a survey conducted in March and April 2005 in the United States, the United Kingdom, and Japan by the Center for International Business at the Tuck School of Business at Dartmouth. Again questionable on "spectacular" growth; patchy investment climate - agree.
http://www.tuck.dartmouth.edu/news/releases/pr20050524_china.html
As the entire world observed in August at the 2008 Olympic Games in Beijing, China has emerged with unparalleled force onto the world stage. Most businesses are aware of the lure of the Chinese market, and stories abound of unbridled opportunities and potential for financial gain. But with all great opportunities come significant risks. My experience practicing at an international law firm in Beijing, China, taught me first-hand that not every business can, or should, go to China. This experience also helped me gain some insight as to what any attorney advising a client about doing business in China should keep in mind.
http://www.thecompletelawyer.com/international-business/asia/in-china-you-play-by-another-set-of-rules-386.html
If the host country’s regulatory policies are too stringent, it may be hard for firms to operate and this would prohibit international business. If the opposite occurs, and regulatory polices laxed, then the local markets and economies would be corrupt and in disarray. The lesson is a very important one, for it brings new light to this issue that has been extensively researched and reported in recent times. The lesson further shows the complexity in international business and conveys the difficulty, for both firms and governments, to reach a business agreement that is fair to both parties.
Article: http://ageconsearch.umn.edu/handle/30689
UPDATE 2006
http://www.businessweek.com/smallbiz/content/jan2006/sb20060105_958312.htm
culture
Http://www.legacee.com/Culture/CultureOverview.html
Xinhua’s new ban to be nothing more than a useless power play spurred on by China’s communist bureaucracy, which has become accustomed to freely manipulating public policy. This ridiculous notion will not however survive under WTO supervision, a powerful force which will ensure that free financial information flow will continue to provide growing Chinese firms the elemental foundations for expansion and opportunity, factors which will ultimately enrich the Chinese population providing more jobs and economic prosperity.
Source Article: http://www.ft.com/cms/s/0/4a335dda-e8c4-11dc-913a0000779fd2ac.html
The main implication of doing business in China that we discussed in class that relates to some of the topics from this article is that China was then and still is a communist country.
Website: http://www.amanet.org/editorial/chinabusiness.htm
B. The business lesson here is that learning what the culture, traditions, market research, etc. is not always enough to break into any industry in Greater China. There is an awful bureaucratic system that takes place in order to establish there.
article link:
http://www.doingbusiness.org/ExploreTopics/StartingBusiness/Details.aspx?economyid=42
“Conditions at Chinese toy factories called 'brutal'”, by David Barboza, this article is about the Chinese work conditions in toy manufacturing. Many companies were under investigation due to the illegal treatment of employees. The companies in China are well known in the United States, even though the factories mistreating the workers, companies in the US continued to do business with them. “...brutal conditions" and illegal practices that exist in Chinese toy factories, many of which supply some of the world's biggest brand name toy makers, including Disney, Hasbro and Sega”.
http://www.iht.com/articles/2007/08/21/business/toyside.php
The article emphasizes how crucial it is to research foreign partners and how U.S.
Department of Commerce offices in Beijing, Chengdu, Guangzhou, Shanghai,
Shenyang, and Hong Kong can provide lists of local business service providers,
consultants, and law firms.
(http://www.buyusa.gov/pittsburgh/adviceforchina.html)
After 1978, his successor DENG Xiaoping and other leaders focused on market-oriented economic development and by 2000 output had quadrupled. For much of the population, living standards have improved dramatically and the room for personal choice has expanded, yet political controls remain tight.
STATE AND CIA PRIMARILy USE OFFIICIAL DATA; so 'dramatic improvement" is questionable. Better than before. true; drmatic? questionable.
http://globaledge.msu.edu/countryInsights/country.asp?countryID=17®ionID=3
However, despite spectacular economic growth, exports, and inward investment, China's business climate still remains patchy for foreign companies, according to a survey conducted in March and April 2005 in the United States, the United Kingdom, and Japan by the Center for International Business at the Tuck School of Business at Dartmouth. Again questionable on "spectacular" growth; patchy investment climate - agree.
http://www.tuck.dartmouth.edu/news/releases/pr20050524_china.html
As the entire world observed in August at the 2008 Olympic Games in Beijing, China has emerged with unparalleled force onto the world stage. Most businesses are aware of the lure of the Chinese market, and stories abound of unbridled opportunities and potential for financial gain. But with all great opportunities come significant risks. My experience practicing at an international law firm in Beijing, China, taught me first-hand that not every business can, or should, go to China. This experience also helped me gain some insight as to what any attorney advising a client about doing business in China should keep in mind.
http://www.thecompletelawyer.com/international-business/asia/in-china-you-play-by-another-set-of-rules-386.html
If the host country’s regulatory policies are too stringent, it may be hard for firms to operate and this would prohibit international business. If the opposite occurs, and regulatory polices laxed, then the local markets and economies would be corrupt and in disarray. The lesson is a very important one, for it brings new light to this issue that has been extensively researched and reported in recent times. The lesson further shows the complexity in international business and conveys the difficulty, for both firms and governments, to reach a business agreement that is fair to both parties.
Article: http://ageconsearch.umn.edu/handle/30689
Wednesday, February 18, 2009
59202 materials covered February 16
REVIEW
Business Implications OF THE POLITICAL SYSTEMS OF THE 3 ECONOMIES IN GREATER CHINA
THEN AND NOW: could be different, could be similar, depending on whether conditions and systems have changed much
IN 1987
$50 millon or more joint ventures – many approvals, including National People’s Congress
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRE LOTS OF small and medium size companies – a British Colony
Perception in Taiwan – Mainland China is the place to go to make lots of money
In 2009
$50 millon or more joint ventures – many approvals, including National People’s Congress
The systems have not changed much; so business and investment climates have not changed much
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRES LOTS OF small and medium size companies – now under the political control of Mainland China
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
THEN very different from Now
Then
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run –
long run –
PRC pushing exports
Now even more
Short run –
Long run
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan:
… why?
NEW
THEN AND NOW
Perception in Taiwan – Mainland China is the place to go to make lots of money
In 2009
$50 millon or more joint ventures – many approvals, including National People’s Congress
The systems have not changed much; so business and investment climates have not changed much
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRES LOTS OF small and medium size companies – now under the political control of Mainland China
NOW
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
Compare by examples the relative ease of doing business in the three economies of Greater China
Two cases in PRC – one, service jv, 5 years to complete negotiations; another 2 years before production can begin plus up front costs, etc.
Hong Kong – representative office for major us company – 4 hours to set up; same jv as second example in PRC – on the market in 6 weeks, no up front costs, no etc.
In Taiwan, large jv approved in weeks
THEN very different from Now
Then?
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run – roc, hk, prc
long run – prc, roc, hk, if ….
PRC pushing exports
Now
Short run – prc, roc, hk
Long run – prc, roc, hk
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan: Beijing, Beijing, Beiping … why?
Be respectful always
ART
Profitable? Why? 2 reasons
Wahlberg - .5 pt
Nanch .5 pt.
Ian .5 pt.
Yang .5 pt.
Tony – association? .5 pt.
Shauna – rare? .5 pt.
Labor-intensive
Technique intensive
Transparency international
Differences?
Key Philosophies in China:
Confusianist thought
Troy 1 pt.
Filial piety – part of Chinese thinking and culture
Ladd .5 pt.
Daoist thought
Ian 1 pt.
Buddhist thought
Hu 1 pt.
Communist thought
Mark .5 pt.
Yang .5 pt.
How is communism like a religion?
Party lines …
.5 ladd
Why is knowing philosophy important for doing business in greater china?
Confuianist thought
Philosophies
Up through basis of confucianist thought
Business Implications OF THE POLITICAL SYSTEMS OF THE 3 ECONOMIES IN GREATER CHINA
THEN AND NOW: could be different, could be similar, depending on whether conditions and systems have changed much
IN 1987
$50 millon or more joint ventures – many approvals, including National People’s Congress
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRE LOTS OF small and medium size companies – a British Colony
Perception in Taiwan – Mainland China is the place to go to make lots of money
In 2009
$50 millon or more joint ventures – many approvals, including National People’s Congress
The systems have not changed much; so business and investment climates have not changed much
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRES LOTS OF small and medium size companies – now under the political control of Mainland China
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
THEN very different from Now
Then
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run –
long run –
PRC pushing exports
Now even more
Short run –
Long run
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan:
… why?
NEW
THEN AND NOW
Perception in Taiwan – Mainland China is the place to go to make lots of money
In 2009
$50 millon or more joint ventures – many approvals, including National People’s Congress
The systems have not changed much; so business and investment climates have not changed much
MAINLAND CHINA – COMMUNIST
TAIWAN – MIXED ECONOMY
HK – LAISSEZ FAIRES LOTS OF small and medium size companies – now under the political control of Mainland China
NOW
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
Compare by examples the relative ease of doing business in the three economies of Greater China
Two cases in PRC – one, service jv, 5 years to complete negotiations; another 2 years before production can begin plus up front costs, etc.
Hong Kong – representative office for major us company – 4 hours to set up; same jv as second example in PRC – on the market in 6 weeks, no up front costs, no etc.
In Taiwan, large jv approved in weeks
THEN very different from Now
Then?
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run – roc, hk, prc
long run – prc, roc, hk, if ….
PRC pushing exports
Now
Short run – prc, roc, hk
Long run – prc, roc, hk
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan: Beijing, Beijing, Beiping … why?
Be respectful always
ART
Profitable? Why? 2 reasons
Wahlberg - .5 pt
Nanch .5 pt.
Ian .5 pt.
Yang .5 pt.
Tony – association? .5 pt.
Shauna – rare? .5 pt.
Labor-intensive
Technique intensive
Transparency international
Differences?
Key Philosophies in China:
Confusianist thought
Troy 1 pt.
Filial piety – part of Chinese thinking and culture
Ladd .5 pt.
Daoist thought
Ian 1 pt.
Buddhist thought
Hu 1 pt.
Communist thought
Mark .5 pt.
Yang .5 pt.
How is communism like a religion?
Party lines …
.5 ladd
Why is knowing philosophy important for doing business in greater china?
Confuianist thought
Philosophies
Up through basis of confucianist thought
59201 materials covered February 16
necessary conditions for doing international business
types of international business
trade
representative office
investment
Size of the markt depends on, at least,
per capita income and
# of people
THEN and NOW
Group 2 - Wednesday
Start here next time
3 ways to accelerate negotiatiocon in mainland China
First question on test next Monday, February 23
1. What is the USG’S definition of China
What is our definition of Greater China
who is right?
Why?
ANSWERS WILL BE IN WORDS AND NOT MULTIPLE CHOICE.
Business Implications OF THE POLITICAL SYSTEMS OF THE 3 ECONOMIES IN GREATER CHINA
THEN AND NOW: could be different, could be similar, depending on whether conditions and systems have changed much
IN 1987 – approvals – in general; specifically
Now – approvals – in general; specifically
$50 millon or more joint ventures – many approvals, including
Systerms
MAINLAND CHINA –
TAIWAN –
HK – LAISSEZ FAIRE LOTS OF small and medium size companies – a British Colony
Perception in Taiwan – Mainland China is the place to go to make lots of money, yet …
In 2009 …
$50 millon or more joint ventures – many approvals, including National People’s Congress
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
Compare by examples the relative ease of doing business in the three economies of Greater China
Two cases in PRC –
Hong Kong – representative office for major us company – 4 hours to set up; same jv as second example in PRC – on the market in 6 weeks, no up front costs, no etc.
In Taiwan, large jv approved in weeks
THEN very different from Now
Then
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run – roc, hk, prc
long run – prc, roc, hk, if ….
PRC pushing exports
Now
Short run – prc, roc, hk
Long run – prc, roc, hk
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan: Beijing, Beijing, Beiping … why?
TEST NEXT MONDAY will cover through this Wednesday
Through part of philosophy
Next Confucianist thought
types of international business
trade
representative office
investment
Size of the markt depends on, at least,
per capita income and
# of people
THEN and NOW
Group 2 - Wednesday
Start here next time
3 ways to accelerate negotiatiocon in mainland China
First question on test next Monday, February 23
1. What is the USG’S definition of China
What is our definition of Greater China
who is right?
Why?
ANSWERS WILL BE IN WORDS AND NOT MULTIPLE CHOICE.
Business Implications OF THE POLITICAL SYSTEMS OF THE 3 ECONOMIES IN GREATER CHINA
THEN AND NOW: could be different, could be similar, depending on whether conditions and systems have changed much
IN 1987 – approvals – in general; specifically
Now – approvals – in general; specifically
$50 millon or more joint ventures – many approvals, including
Systerms
MAINLAND CHINA –
TAIWAN –
HK – LAISSEZ FAIRE LOTS OF small and medium size companies – a British Colony
Perception in Taiwan – Mainland China is the place to go to make lots of money, yet …
In 2009 …
$50 millon or more joint ventures – many approvals, including National People’s Congress
Survey by the Democratic Progressive Party = 90% of Taiwan’s Chinese investors in Mainland China are not making profits.
BIG NEW SIMILARITY: ALL 3 ECONOMIES ARE IN SERIOUS RECESSION, JUST LIKE THE REST OF THE WORLD
Compare by examples the relative ease of doing business in the three economies of Greater China
Two cases in PRC –
Hong Kong – representative office for major us company – 4 hours to set up; same jv as second example in PRC – on the market in 6 weeks, no up front costs, no etc.
In Taiwan, large jv approved in weeks
THEN very different from Now
Then
the relative availability of business opportunities in these three economies in the short run and in the long run:
short run – roc, hk, prc
long run – prc, roc, hk, if ….
PRC pushing exports
Now
Short run – prc, roc, hk
Long run – prc, roc, hk
PRC really pushing exports
The proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan: Beijing, Beijing, Beiping … why?
TEST NEXT MONDAY will cover through this Wednesday
Through part of philosophy
Next Confucianist thought
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