Awash in Cash Chinese Consul General Makes His Inaugural Visit To
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FosteringC BusinessHINA and Cultural HarmonyINSIGHT between China and the U.S. VOL. 9 NO. 8 www.chinainsight.info SEPTEMBER 2010 Chinese Consul General makes Community his inaugural visit to Minnesota By Greg Hugh, Staff Writer pleased to be visiting Minnesota since it authentification to both local Chinese and is one of the nine states that his consulate non-Chinese people.” covers which also includes Illinois, Iowa, The meeting continued as an open Kansas, Colorado, Michigan, Missouri and forum with the group interacting in round Wisconsin. He noted that during recent robin fashion discussing a variety of topics times there have been many meaningful con- with Consul General Yang that ranged from tacts between China and the midwest region education, business and culture. Several Jane Wilson, Honorary Chinese of the United States. Thus he states, “My members of the group asked how the Con- Minnesotan of Note consulate is committed to further promoting sulate could help to establish relationships cooperation and exchanges between the two between local professionals that could pro- Arts sides in various fields, protecting the legal vide their services to businesses in China. rights of Chinese citizens in the consular He responded by stating that anyone can districts and providing consular services send requests regarding any specific ideas related to passport, visa, notary public and or project directly to the Consulate thru the Consul General Yang Guoqiang appropriate channels. ewly appointed Consul General Yang Guoqiang for the Con- Nsulate General of the People’s Republic China in Chicago recently visited with representatives of the Chinese com- munity in Minnesota at a meeting organized by community leader, Vincent Mar. Making his first visit to Minnesota, Consul General Yang traveled with his wife along with sev- eral other staff Consul members based at the Consulate in Chicago. In his opening remarks to the gathering, Consul General Yang (center) with members of the Twin Cities Chinese community. Consul General Yang stated that he was Photo by David Cheng Consul General continues on Page 3 Awash in Cash Why do Chinese banks, swimming in savings, invest in U.S. Treasury bills when rates of return are far higher at Delicate balance is shown in home? The answer may lie in disparity among Chinese firms in productivity and access to credit ‘China in Transition’ By Douglas Clement, Editor, The Region flow to where it can be used most profitably; A theory of structural change if rates of return are higher in productive In “Growing Like China,” forthcoming country A than in low-productivity country in the American Economic Review, with B, capital will flow to A. The same thought coauthors Zheng Song of Fudan University applies to companies: Lenders will invest in and Fabrizio Zilibotti of the University of productive firms that promise higher returns. Zurich, Storesletten proposes a “theory of But in reality, fast-growing, highly pro- economic transition” that accounts for both ductive China sends an enormous amount of the growing foreign surplus and the high resources to other countries—most notably growth/high return to capital that China has by buying U.S. Treasury bills, though they experienced in recent decades. pay very little interest—when companies “What motivated this work,” said Store- within China could put those resources to sletten in a recent interview, “was that we Master Lei’s happy reunion with use by investing in profitable domestic firms were totally puzzled by two observations. his artist friends in St. Paul with far higher rates of return. Surprisingly, Number one: The rate of return from capital within the nation, bank loans tend to flow to in China is very, very high. That has been Culture firms that are relatively unproductive—an shown to hold true if you look at aggregate inefficiency that is one of the few apparent data or micro data. And number two: At brakes on China’s otherwise unrelenting the same time, China is building up a huge economic expansion. surplus [of savings]. So why on earth would What explains these anomalies? Political a country buy low-paying T-bills instead n recent decades, few phenomena commentators often argue that the foreign of exploiting the high rate of return on have been as globally significant as surplus occurs because China manipulates capital?” IChina’s astonishing economic trans- exchange rates, holding the yuan at an arti- According to neoclassical theory, a formation. Over a matter of years, it has ficially low level to the dollar so as to curb country with a high domestic return to transitioned from a poor nation dominated spending on imports while flooding foreign capital should attract large capital inflow by small farmers and enormous, plodding markets with underpriced Chinese exports. from investors in other nations. But China Rare World Map of 1602 state-owned enterprises into a dynamic But recent research by Minneapolis Fed has manifested the opposite. Indeed, foreign economy where private companies shape senior economist Kjetil Storesletten and reserves soared from [US]$21 billion in ALSO IN THIS ISSUE international markets and annual GDP his colleagues provides a simpler explana- 1992 to [US]$2,130 billion in 2009. growth surges past expectations. As this is tion, one that relies on disparities among Of course, China’s economy grew at a Events..................................2 written, economists predict that China will China’s firms in their relative productivity blistering pace during those years; perhaps Commentary..............................3 soon eclipse Japan as the world’s second- and access to credit. Their story, fashioned the rapid growth in foreign reserves simply Arts......................................4 & 8 largest economy, and it is arguably only a into a mathematical model, provides a close represents a constant share of growing eco- Sports.....................................5 matter of time before the United States, too, match to the data patterns seen in China’s nomic output. No, the surplus grew faster Education...............................6 places second. economy over the past 20 years and suggests than the economy itself; in 1992 the surplus/ Also remarkable is how China’s growth that China’s growth experience and grow- GDP ratio was 5 percent, but by 2009 it was Finance.................................7 patterns have usurped several core predic- ing surplus must be understood in light of 46 percent (see Chart 1). Community..............................9 tions of conventional economic theory. the structural change the country is going Culture......................10 & 14-16 Standard models suggest that capital will through. Awash in Cash continues on Page 12 Economy.........................11-13 PAGE 2 > SEPTEMBER 2010 events www.chinainsight.info CAAPAM will host 2010 annual CHINAINSIGHT CHINAINSIGHT is seeking conference: Publisher: Production Editor “Rising Above Uncertain Times!” Gregory J. Hugh Must be passionate about The Chinese American Academic & their body works, how interference to their [email protected] our mission: in addition to being Professional Association in Minnesota nervous systems affects their health, and success-oriented, self-motivated, (CAAPAM) will host its 2010 annual con- ways to improve their health starting today. Editor: resourceful, creative, disciplined ference, “Rising Above Uncertain Times!” Jennifer Nordin The event will include four presentations, “Uncertainty Here; Opportunities There – and community-minded. [email protected] Responsibilities include layout dinner and an open discussion. Looking at China from a Medical and design of 10 issues per year Technology Perspective” Presentations Paul J. Gam Manager of Operations/ using Adobe InDesign and Photo- Circulation: shop, some proofreadiing, must be “Make Your Heart Smile” Paul J. Gam is Vice President of Inter- Richard He Internet savvy. Jon Pojasek national Development at St. Jude Medical, Jon Pojasek is a personal trainer, life Inc. (NYSE:STJ), a Fortune 500 medical [email protected] This is a part-time, coach, and motivational speaker, with a technology company based in St. Paul, volunteer position. smile. Jon is often heard saying “Life is MN. He leads mergers and acquisitions, Marketing Director: short and the time is right to start writing strategic alliances, and other international Will Ahern Contact Greg Hugh at your book of life and happiness” Jon will business development activities. Paul has [email protected] 952-472-4757 or share his passion and experiences with some been the interim Managing Director and General Manager for Asia-Pacific, based in simple strategies to help train and condition Production Editor: [email protected] yourself to live a fullest life. Hong Kong; and started the wholly-owned subsidiary in China, for which he continues Dawn Murphy [email protected] “A Life with Few Options” to serve as Chairman of the Board. HINA NSIGHT C I Kao Kalia Yang, Keynote Speaker The conference will be held on Saturday, Artist/Intern: Kao Kalia Yang is a writer from the Sept. 25 at Jun Bo Chinese Restaurant, Lauren Hugh SEEKS ADVERTISING Hmong community. Her first book is The 7717 Nicollet Ave., Richfield, MN 55423. REPRESENTATIVE… Latehomecomer: a Hmong family memoir. All speakers will present in English. There It is the first book to have ever won two Staff Writers: will be a dinner of authentic Chinese cuisine Greg Hugh Must be passionate about our mis- Minnesota book awards as well as nine after the presentations and open discussion [email protected] sion: in addition to being success- other national awards in literature. Kao following the dinner. oriented, must be self-motivated, Kalia Yang is a graduate of Carleton Col- The fee to register for the conference resourceful, creative, disciplined lege and Columbia University in New York only (no dinner) is US$15. The fee to reg- Elizabeth Greenberg and community-minded. City. She is serving as a writer-in-residence ister for conference and dinner is US$30. [email protected] at the University of Wisconsin-Eau Claire. Student can register for the conference GENEROUS COMMISSION SCHEDULE and dinner is US$15.