Urge for Green Technological Transformation

United Nations released World Economic and Social Survey 2011: The Great Green Technological Transformation, a report analyzed the positive and negative impact of several government energy policies and called for governments’ urgent action to accelerate green technology transformation. The report emphasized three reasons why governments need to put green technological transformation high on their agenda:

  • Sustainable energy transition: 

A global sustainable energy transition needs to be achieved within four decades, a significantly faster rate than in the past…Global sustainable energy policy must take into special consideration the 3 billion poor people who aspire to gaining access to electricity and modern energy services.

  • Towards a truly green revolution for food security:

Food security must now be attained through green technology so as to reduce the use of chemical inputs (fertilizers and pesticides) and to make more efficient use of energy, water and natural resources, as well as through significant improvement of storage facilities, and marketing to reduce waste.

  • Reducing human harm from natural hazards:

The frequency of natural disasters, especially in the form of floods and storms, has quintupled over the past 40 years, the elevated disaster risk being partly due to the effects of climate change. Developing countries bear a higher share of the adverse consequences of that increased risk.

See and download the full report:  World Economic and Social Survey 2011: The Great Green Technological Transformation

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China’s New Measure to Narrow Wealth Gap: Cutting Tax for Low-income Class

Source: trak.in

Chinese lawmakers are revising the personal income tax law recently. The draft amendment would raise the minimum threshold for taxable personal income from 2,000 yuan (304 US dollars) to 3,000 yuan per month (456 dollars), and reduce the number of income tax brackets from nine to seven.

Those two adjustments will cut tax for low- and middle-income earners and raise the tax rates on people whose monthly salary is more than 19,000 yuan (2911 US dollar), aiming to narrow the wealth gap in China, as well as to encourage more domestic consumption.

Taxable Income (yuan) Current tax (yuan) New tax (yuan) Change [=new-current]
3000 75 0 -75
4000 175 50 -125
5000 325 125 – 200
7500 725 375 -350
8000 825 475 -350
9000 1025 675 -350
10,000 1225 875 -350
15,000 2225 2025 -200
19,000 3025 3025 0
20,000 3225 3275 50
30,000 5625 5775 150
50,000 10725 11375 650
70,000 17425 17975 550
100,000 28825 30175 1350

China is in desperate need of those tax revising measures. It has reached a dangerous point that raises great angers among workers in all kinds of industries, which  have been widely unleashing on the Internet through emerging social media such as micro blogs, blogs and BBS, and led to strikesin many provinces.

internationalliving.com

While the lawmakers’ good intention deserves applause, they still ignore an important loophole in the tax laws: the taxable income in China’s current personal income tax laws measures mainly wages, not including dividends, interests, gains from property or other type of income. It makes the high-income class get richer by avoiding paying tax for their non-wage income, which is a large portion of their earnings. Therefore, unless the lawmakers redefine the taxable income as “all income from whatever source derived,” and put it into practice, China can never significantly reduce the wealth gap, not even close.

Duty-free Store in Hainan: New Strategy to Stimulate Domestic Spending

Source: news.xinhuanet.com

Chinese mainland shoppers have been thrilled by this news: Hainan, China’s southernmost island province, kicked off an offshore tax-free scheme on April 20, going after Okinawa in Japan, Jeju in Korea and Penghu County in Taiwan Island to become the fourth island of implementing a tax-rebate scheme in the world.

Over 17,0000 people swarmed into Sanya’s tax-free store on the first day, splurging on imported jewelry, watches, perfumes and cosmetics. Shortly after the store’s opening, cosmetics and perfumes such as Estee Lauder Advanced Night Repair Synchronized Recovery and Dior J’adore Perfume were nearly out of stock. For those luxury brand lovers who travelled all around the country to this tropical island and waited for hours to enter the store and check out, the bargain prices of luxury goods which were 10 to 35 percent lower than in other domestic stores were too irresistible to say no.

Imported Goods Duty-free price at Sanya Normal price in China
Dior J’adore Eau De Parfum Spray for Women – 3.4oz 785 yuan / 120 US dollars 980 yuan / 150 US dollars
Lancome Absolue Premium BX Replenishing Cream 1115 yuan / 171 US dollars 2000 yuan/307 US dollars
Chanel NO.5 Eau De Parfum Spray for Women – 3.4oz 950 yuan / 146 US dollars 1280 yuan / 197 US dollars

While the store celebrated large daily turnover of more than 10 million yuan (1,536,880 US dollars), the zealous customers’ appetites for the imported commodities were still not satisfied: they complained that they could only purchase up to 5,000 yuan (768 US dollars) worth of products on this tropical island, much smaller than the 20 million yen (2441 US dollars) limitation of tax-free shopping in Japan’s Okinawa Island, not to mention that the mainland visitors can only enjoy this duty-free policy twice a year, while island residents can only once a year.

Source: China Luxury Market study 2010

Emerging middle class in China is showing growing interests in luxury goods. But due to the high duties, luxury goods in china are up to 50% more expensive than Hong Kong, Europe or North America, driving people to purchase these items overseas. According to China Luxury Market study 2010 released by  Bain & Company, a global management consulting firm, total luxury spend by mainland Chinese reached 156 billion yuan (24 billion US dollars) in 2009, but less than 50 percent, or 68 billion yuan (10.45 billion US dollars), was spent domestically.

As the old saying, “Every miller draws water to his own mill.” It is obvious one of the strategies that the Chinese government is trying to transform China’s economy from export-driven to domestic spending-driven, attracting Chinese consumers’ attention back to the domestic market in the Twelfth Five-Year Plan period. I have to say, it is a good start. Let’s keep an eye on how it goes.

A Rational Decision Maker: Stay Away from Next Panic Buying

Vincent Thian/AP

Chinese consumers just recover from the recent nationwide salt panic buying. The panic, which began in China’s coastal provinces and spread quickly throughout the country, was a result of two misunderstandings:

  • The radiation from reactors at Japanese nuclear plants, caused by the devastating earthquake and tsunami would contaminate sea salt supplies in China.
  • The iodine in salt can prevent thyroid cancer, which is a disease associated with radiation exposure.

Misled by the rumors, millions of Chinese consumers flocked to their nearby supermarket, bought as many bags of salt as they could, which made the salt price jump ten times in some cities. China Daily reports a man purchased 6.5 tons of salt during the insane buying period, now finds himself stuck with three truckloads of salt, which can’t be returned, sold or even transported.

straightfromthedoc.com

Chinese consumer is the victim in this rumor-led crisis, of course no one wants it to happen again. So how should we do to prevent it?

Many people blame the Chinese government for not responding quickly and effectively, but I don’t think it is the cause. We all know in a market-oriented economy, the price is determined by the demand and the supply. China is now transforming into a more open market, the price fluctuation is and will always be a common phenomenon. Open your eyes and be realistic. We are not living in a planned economy era any more. We cannot depend on government’s macroeconomic control all the time. We have to hand over the power to the “invisible hand” of the market. Otherwise, Chinese economy cannot be strong enough to enter the entirely free international marketplace.

But we’ve got to prevent it, and there is a way. All we should do is to become a rational decision maker to protect ourselves from next waves of social panic, and that can be achieved within several steps:

  • Be aware of the economic situation and be alert to the unusual signs. So when the crisis approaches, you can anticipate it and have enough time to make your decision.
  • Once you are aware of the unusual signs, you need to realize what are  important in making the decision. In this case:
    • the accuracy of the information: find out whether the rumors are true or not;
    • basic health knowledge: you should know that taking too much salt is bad for your health, a small amount of salt will be enough to maintain your body’s daily activities;
    • general prediction of the uncertain future:  the government will not let the salt price jump too much, since the seasoning is the fundamental ingredient in people’s life. It can go from 1.6 to 2 considering China is in a high inflation period, but if it goes from 1.6 yuan to 16 yuan, it is ridiculous, and you don’t want to be part of it.
    • financial cost: if you buy a small bottle of salt, it usually costs you 1.6 yuan ($0.25), at the highest price it costs you 16 yuan ($2.4), and you can consume it for several months. But if you buy 6.5 tons of salt, it costs you 27,000 yuan ($4,100), and you can NEVER eat it up in your life!
  • After understanding these, you can choose the optimal decision easily. You may still decide to go to buy several bottles to emotionally calm your fears towards the uncertain future, but  I am sure you will not rush into the supermarket to buy tons of salt, and you will not panic if the salt has been out of stock.

China’s Ambitions in the 12th Five-Year Plan

Source: the Atlantic

As the annual sessions of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference closed this week, it is time to look over the highly anticipated draft of the 12th Five-Year Plan. Xinhua News Agency did a good job on summarizing the key words of the 12th Five-Year Plan. Let’s take a closer look at China’s ambitions:

Economic targets

GDP to grow by 7 percent annually on average;

— More than 45 million jobs to be created in urban areas;

— Urban registered unemployment to be kept no higher than 5 percent;

Prices to be kept generally stable.

Economic restructuring

— Rise in domestic consumption;

— Breakthrough in emerging strategic industries;

Service sector value-added output to account for 47 percent of GDP, up 4 percentage points;

— Urbanization rate to reach 51.5 percent, up 4 percentage points.

Innovation

— Expenditure on research and development to account for 2.2 percent GDP;

— Every 10,000 people to have 3.3 patents.

Environment & clean energy

— Non-fossil fuel to account for 11.4 percent of primary energy consumption;

— Water consumption per unit of value-added industrial output to be cut by 30 percent;

— Energy consumption per unit of GDP to be cut by 16 percent;

Carbon dioxide emission per unit of GDP to be cut by 17 percent;

Forest coverage rate to rise to 21.66 percent and forest stock to increase by 600 million cubic meters;

Agriculture

— Annual grain production capacity to be no less than 540 million tones;

— Farmland reserves to be no less than 1.818 billion mu.

Livelihood

— Population to be no larger than 1.39 billion;

— Life span per person to increase by one year;

Pension schemes to cover all rural residents and 357 million urban residents;

— Construction and Renovation of 36 million apartments for low-income families;

— Minimum wage standard to increase by no less than 13 percent on average each year;

Social management

— Improved public service for both urban and rural residents;

— Improved democracy and legal system;

— Better social management system for greater social harmony;

More than 10 percent of all residents will be registered as community volunteers.

Reform

— Encourage qualified enterprises to get listed in stock markets;

— In-depth reform in monopoly industries for easier market entry and more competition;

— Improved government efficiency and credibility

After being the world’s second largest economic entity, Chinese government finally realizes that the export-driven, GDP-oriented economic development should be replaced by a more sustainable developing way, because there are so many problems being brought up: the high inflation, the real estate bubble, the environment  pollution and energy waste, the underdeveloped social security and so on.

One another thing is also worth to emphasize: the community volunteer is a total new concept for most of the Chinese. China haven’t had a community culture as Western society. Back into the “Red Revolution” period, people are belonging to “Danwei“, which means a work unit. According to Wiki, “a work unit acted as the first step of a multi-tiered hierarchy linking each individual with the central Communist Party infrastructure.” Now building a community culture to replace the Danwei culture indicates that the hierarchy linkage between citizens and the CCP is officially weakened, which I think is a good signal for Chinese society.

It is also interesting to know how Western looks at the 12th Five-Year Plan. Here are two totally opposite opinions: one is criticizing that Chinese government just have a “big talk”- alway has some glorious goals, but never releases any details about how to achieve these goals in its plan; another is hoping the United State could learn from China to have some clear directions in a certain period.

Which one you agree more?

http://www.youtube.com/watch?v=ON9hJ7NVIcM

CSA: A new way to deal with food safety concerns in China?

By 46137 (flickr.com)

China is notorious for its unsafe food. While Americans go to weekly farmer’s markets to purchase products that they could get cheaper in supermarket, Chinese farmer’s markets are still waiting for effective regulations to meet food safety standards (read my previous blog about Chinese farmer’s markets). Now Chinese consumers are looking for a new wayto solve this problem, by running organic farms that is enlightened by Western community-supported agriculture (CSA) model, reported by USA Today.

Shi Yan, 28, a rural development expert, says she was inspired by the CSA model when working for six months in 2008 at the Earthrise farm in Madison, Minn. Shi says she shocked her parents by choosing the life of a peasant despite her degrees from a top Chinese university.

At the Little Donkey Farm, which she opened in 2009 in Beijing’s semi-rural suburbs, Shi hears from other people planning similar projects. “Their first question is usually ‘Can I make money from this?’ ” Shi says. “The purpose is not making money, but sustaining farmers on the land, and teaching city people the importance of protecting our planet and the soil.”

China has about 40 “real” CSA farms, she says. A CSA conference in Beijing last month attracted more than 250 people. At Shi’s farm, about 100 members pay to work their own plot of land and 500 members pay a $600 annual fee for a weekly supply of vegetables grown without the chemical fertilizers and pesticides used on most Chinese farms.

I think organic farm is a promising industry in China – maybe it is not attractive to most of the Chinese right now, but it will be the trend. Think about the booming young consumers who are like Shi Yan in this story: they were born in 1980’s, a generation that never worry about lack of food. They went to college to receive high education. They are picky about their lifestyle and life quality. They have more connections with the outside world through the Internet. All of these make them not easily be pleased by just having enough food to eat and not easily be fooled by mainstream propaganda.

But the CSA model also cannot avoid an issue: regulation. Without a complete and effective food regulation supervising the whole process, speculators who only care about “Can I make money from this?” will ruin the CSA farming industry in China. How could they establish their regulation system, either depending on government or contracts? It is going to be an issue haunting this emerging industry for a long time.

Watch videos from Youtube to learn more about CSA:

What could China learn from American agriculture?


I had a general idea of American farmers (mostly learned from news media and movies) before I came to the United States: having a very big farm; growing and harvesting large amount of crops with the help of modern machines; possessing the land as their private property; being well educated; and the most important part, getting decent incomes from their land. The life of American farmers sounded amazing for me, since what I learned in China is being a farmer equals to being a poor without much education (I mean the real farmer). But I was not surprised by it at all. I could easily assume that the productivity of land is credited to the improved technology and the scientific research on agriculture.

What I learn by reading four books of American agriculture confirms some of my assumptions, but completely turns over some others.

In the book A Revolution Down on the Farm: The Transformation of American Agriculture since 1929, the author Paul K. Conkin shows a general picture of the agriculture revolution in the past century, changing from a small family model to a large agribusiness model. He gives the credits to the new machines, the electrification, the chemical inputs and the plant and animal breeding, which confirms my assumption. But what I didn’t know is that the productivity revolution causes surpluses and lower prices, and leads to the government intervention, described by Paul as “an institutional framework for this growth”.

It is an interesting point for me: while the American government subsidy in farming is to reduce the amount of crops production, the Chinese government is subsidizing the agriculture industry to increase its production, in order to bring down the competitive disadvantage of Chinese crops in the international market, and to reduce the agricultural products imports from the United States. In the United States, the agriculture revolution took place spontaneously and smoothly in the middle 20 century; however in China, the competition from the international market gives the local agriculture industry too much pressure to grow healthily in the pace of nature. The pressure reflects on the Chinese government too, whose subsidy is only focusing on the industry’s total output, without doing enough scientific researches on how to increase the productivity. As a result, the land is overused: the arable land is decreasing rapidly in China.

But the agriculture revolution is not a good thing in all aspects, that’s what Wendell Berry talks in his book The Unsettling of AmericaCulture and Agriculture. The agricultural industry changes from a small family farming model to a large agribusiness model, at the same time, the role of the farmer changes from the nurturer to the exploiter. Farming is a form of business now, Wendell argues, “productivity combined with processing and marketing efficiency”, and the business management ability is more important than the real farming skills. The whole traditional agricultural culture built on the intimate relationship between human being and the land, is destroyed by the agribusiness system.

The angle of Berry’s book is unique. “Get big or get out”, the philosophy of the agriculture transformation in the United States makes the agriculture highly developed (and also competitive in the international market). But the philosophy is actually the law of the jungle, which emphasizes the “agripower”, which cares more about quantity than quality, which the mass production and consumption culture is built on.

But how could the Americans solve this problem? How should the Americans deal with the agribusiness? I think Josh Kilmer-Purcell and Lisa M. Hamilton both answer this question in their books by narrating the personal stories of several farmers. In Kilmer-Purcell’s book The Bucolic Plague: How Two Manhattanites Became Gentlemen Farmers, the two young New Yorkers are trying so hard to become two gentlemen farmers, which I interpret as the attempt to escape from the mass production and consumption culture and the desire for a simple, idyllic life closed to nature and land.

Although I don’t think any of their stories can be simply copied to China, the desire is showed there. As Harry, an African-American dairyman in Texas, said in Hamilton’s book Deeply Rooted: Unconventional Farmers in the Age of Agribusiness, “I learned from him that you worked not to be rich, but to be free.”

Would like to read more book reviews on the four books ?

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