Harbin Business Exchange in Brief
A Weekly Email Update . . . February 6, 2006

In This Issue

Surprising Harbin - View From The Top

Chinese Wages, Workplace & Environment a view from Middle America

How to Pilot Growth


Surprising Harbin - View From The Top

Did you know . . . Northeast China's Heilong River flows northward out of the Changbai Mountains and cuts across the Manchurian Plain before emptying into the Amur River, separating northeastern China from Russia's Far East? It is the third longest river in China... (behind the Yangtze and the Yellow) winding more than 400 miles longer than our own Mississippi for over 2,700 miles. Like the Mississippi delta, it causes fertile agriculture land and hence an important economic engine for the breadbasket of China. The Heilong is used as an artery for transporting agricultural products grown on the plain. The Songhua tributary flows throughout the Harbin region and also serves as the source of drinking water for over ten million people.

This image shows the Songhua just downstream (southwest) of Harbin. The flatness of the Manchurian Plain has caused the river to meander widely over time. The result is that the river is surrounded by a wide plain that is filled with swirls and curves, showing paths the river once took.

Credit: NASA/GSFC/METI/ERSDAC/JAROS, and the U.S./Japan ASTER Science Team

Dear Friends:

We are pleased to announce that TWO major delegations will be visiting Chicago in the coming weeks. We have previously told you about a provincial level delegation headed by Heilongjiang’s Vice Governor Wang Limin, due in Chicago on March 7.

We are also pleased to announce a municipal level delegation to be headed by our old friend Mr. Hu Youngchang, director of the Habin Economic Cooperation and Promotion Bureau. Though exact arrival time in Chicago is uncertain, they are expected toward the end of February or beginning of March.

Finally - To all our Chinese friends -- and the friends of our Chinese friends - - - we wish you all a very happy and prosperous New Year. This year we celebrate the year 4704, the year of the Dog. Some call it the year of the Fire Dog. Since fire is hot - I like to think of it as the year of the Hot Dog -- one of my favorite culinary delights. So for me, every year is the year of the hot dog.

Have a productive week! Larry P. Horist, HBE Chairman

  • Chinese Wages, Workplace & Environment a view from Middle America
  • By Larry P. Horist

    As I travel the social circuit in the United States, I hear a lot of criticism of China in terms of the working standards and environments. Criticisms fall into three major categories: low wages; workplace conditions and environment; and the impact of Chinese-based business on the American worker.

    As a fast emerging nation, China does not always meet the business and occupational standards the U.S. has come to accept in the latter half of the 20th Century. However, the reality is greatly distorted in the U.S. public psyche.

    First, the wage issue. Chinese wages do fall far below American standards, and the poverty rate in China well exceeds that of western industrial nations. However, no country on earth is moving faster to bring a higher standard of living to the general public than China. Every 5 to 7 years, the number of people moving from poverty to the middle class in China is about 250 to 300 million people – approximating the total population of the United States.

    We should not overlook the relationship between wages and prices. While our inflated cost structure necessitates high incomes to match high prices, the Chinese low wages should be viewed in relationship to the Chinese cost structure. A bushel of corn can be had for 12 cents and a custom made suit for under $90 Even in western China, where annual income can be measured in hundreds of U.S dollars, analysts often overlook the significant impact of bartering, where commodities, not cash, play a major role as the medium of exchange.

    Do not misunderstand. There is sufficient poverty in China to warrant the attention of the world. This should not be ignored as American businesses play an increasing larger role in China.

    This brings me to the second point - working conditions. Rather than criticizing the American companies that drive stakes in China, we should view them as an enormously positive force for good. With some exceptions, American enterprises are leading the way in providing higher salaries, better benefits and improved working conditions. Jobs with American companies are among the most coveted. One only needs to tour the factories of the "old" China to see re-enactments of American industrialization in the early 1900s. Then take a look at the foreign factories gracing the "new" China, -- gleaming work places, with high safety standards, exceptional benefits, top wages and employee-friendly work policies.

    In addition, the inter-relationship of business interests is a powerful force for peaceful co- existence. Healthy free-market competition retards political hostilities. It was once noted that America has never gone to war with a country that has a McDonald's. There is a foundation of truth in that glib quip.

    Perhaps the greatest consternation and controversy involves the impact of China on the American worker. Put simply, the claim is that the low cost of production in China is taking away American jobs. If this were even true to the extent claimed, there is little that can be done about it. As we remove trade barriers, the Chinese will for a time enjoy a competitive advantage. While American wages have been forced above the natural free market rate by a prolonged robust economy, an exceptional cultural dedication to higher wages and the effects of trade unionism's myopic attention to wages and benefits, the Chinese wage scales have been suppressed by decades of political control. Intense trade will bring future balance. In the meantime, America will suffer from a competitive disadvantage in wages, but benefit greatly from the counter inflationary pressures and benefits of lower cost of goods.

    It should also be kept in mind that China has not cost American workers their jobs to any significant extent. Many of the lost jobs in America have simply vanished to industrial technology. Other factory closings have been the result of moves within America - from one state to another. Corporate mergers and takeovers also have trimmed employment roles. Many companies ceased to exist.

    Even those jobs exported beyond our borders are not all destined for China. India, Mexico, Southeast Asia and parts of Africa are also enticing producers to establish factories. Due to the increasing attractiveness, or aggressiveness, of other emerging nations such as Vietnam and Thailand, it is likely that the Chinese share of American jobs will shrink even further.

    On the margins, unfair trade practices and notions of restrictive tariffs can be addressed. In the big picture, however, it is neither practical nor viable in the long run.

    The China transition is amazing, but still uneven. For those who wish to dwell only on the negative, there will be ample anecdotal fodder for their prejudices. To a much greater extent, China has made enormous progress in re- entering the global family and reorienting its economy from central planning to free market. As an American, I root for the home team, but I am pleased that the game is economic competition of the type we proffer rather than ideological enmity and military brinksmanship of a previous era.

  • How to Pilot Growth
  • It is predicted that the Chinese will make more than 2 billion trips during the Spring Festival. In an effort to relieve expected increase in passenger flow, China's civil aviation regulator has approved adding a combined 8,400 flights around the Lunar New Year. This includes direct flights between mainland China and Taiwan.

    Phenomenal growth in Asia has brought its own problem – a shortage of pilots. Boeing has forecast that Chinese domestic traffic will grow 8.8% a year on average over the next two decades and air travel for all markets to, from and within China – will grow at 7.3% annually. The country needs to recruit 12,000 pilots over the next 3 years. It’s two certified pilot training schools can train only 850-900 pilots a year. Consequently,privately owned pilot-training schools are being encouraged to open. Beijing PanAm International Aviation Academy is the first privately owned commercial pilot training school in China and a few weeks ago became the first flight school to receive China Civil Aviation approval. Contact us for more information if you are interested in such a project.

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