Saturday, May 5, 2018

What reporters and you cannot learn from Twitter about the three redwoods or China's plans for their children's economic well-being in 2035 and 2049

The five posts that follow will give the reader a peek into the reality of 21st Century China. The intent is to give the reader a start to catch up to Warren Buffet on the matter of China.

Just before the beginning of the new millennium, Warren Buffett was watching China. He also was buying suits from Li Guilian, chairwoman of Dayang Trands, the Dalian-based menswear manufacturer. And he persuaded his friend Bill Gates and others to do so.

In fact, in a February 1996 Harvard Business Review piece What I Learned from Warren Buffett, near the beginning Bill Gates notes: "We recently vacationed together in China with our wives."

But sadly over the next twenty years Buffett had the economic ideologues who make up the American press and much of the business community baffled about his investments in China.

In addition to investing in smaller companies that were opening operations in China, in 2003 there was this New York Times headline Investors Ponder Buffett's Move Into China Oil. And in September of 2008 MidAmerican Energy, 87.4 per cent owned by Mr. Buffett’s Berkshire Hathaway, acquired a 10 per cent stake in BYD, a Chinese electric carmaker and rechargeable battery producer which led to this story in the British publication The Telegraph a year later Warren Buffett's support helps make Wang Chuanfu China's richest man which notes "Mr Wang has been feted around the world after BYD beat major manufacturers, such as Toyota and General Motors, to build a new generation electric hybrid car."

In February this year a CNBC story noted that "the 87-year-old chairman and CEO of Berkshire Hathaway, dubbed gǔshén ("god of stocks") in Mandarin, permeates consumer, cultural, philanthropic and media domains" in China and:

    Some 3,000 Chinese descended on Omaha for last year's Berkshire Hathaway shareholder meeting, which was also live-streamed and rebroadcast on a loop in China. The festivities are translated into only one foreign language: Mandarin.
    The world has many rich people, and China alone has almost 600 billionaires. What differentiates Warren Buffett for the Chinese public, however, is how he accumulated his wealth: with intelligence, not inheritance.

This week from an interview Warren Buffett: China has ‘found a secret sauce for themselves’ we learned:

    Warren Buffett, known as the “god of stocks” in China, speaks highly of the country’s economic growth and is optimistic about its future.
    “What they’ve done in the last 50 or 60 years is a total economic miracle. I never would’ve thought it could’ve happened,” Buffett told Yahoo Finance’s Andy Serwer in Omaha earlier this year. “What I do know is they have found a secret sauce for themselves, just like we found the secret sauce a couple centuries ago.”
    Buffett says “countries will do it differently,” referring to the fundamental differences between China and the U.S. politically and economically. China’s state capitalism emphasizes economic growth and social stability, with tight control over domestic politics and information. Since the economic reform in 1978, China has grown at a staggering pace of 9.5% per year and has become the world’s second largest economy. In the past five years, China’s GDP growth has slowed down but still achieved an increase of 6.9% last year, dwarfing America’s 2.3% increase.
    And Buffett believes China’s growth story is far from over.

And, of course, online reader comments on the piece by Americans show just how little most know about 21st Century China. You might think that at least the American business press would provide China coverage. But in the U.S. there is a child-like focus on yesterday's profits, the shiny prize in the Happy Meal of the "me" culture. It is sad only because the adults in the room in China have been and are focused economically on assuring a future of economic well-being of people under the age of 30 in the years 2020, 2035, and 2049.

In October 2017 the 19th National Congress of the Communist Party of China (CPC) was held, a once-every-five-years gathering. In March 2018 the "Two Sessions", or lianghui, or simultaneous sessions was held which were the first session of five annual plenary sessions of the 13th National People's Congress (NPC), and the 13th National Committee of the Chinese People's Political Consultative Conference (CPPCC). In April 2018 The Boao Forum for Asia Annual Conference was held.

Together these events represented an important opportunity for the American press to inform Americans about what's going on in China's economic sphere. Much of what little coverage was offered was colored by bias and ignorance.

It will matter to your children and grandchildren if Americans remain closed to accepting China as a viable nation with a government dedicated to the well-being of its people. Right now, depending upon whose numbers you use, China is either the largest economy in the world or the second largest. But regardless of which statistical system you prefer, China is the most populous country and by 2049 China will be the largest economy in the world by a wide margin. That most certainly will affect your children and grandchildren.

This series of posts coincide with the third annual CHINAWEEK event in Los Angeles. On Thursday California Governor Jerry Brown again offered the keynote address.

Urging greater cooperation with China, Brown said: "We all learn from each other and globalization is here. We are not going to get rid of it. And a trade war is stupid. No tariff, no little trade dispute or big trade dispute is going to stop us. The stuff that's not working today, let's figure out how to make it work."

While California’s large and diverse economy (the world's 5th largest economy surpassed only by the total GDP of the United States without California, China, Japan and Germany) tends to insulate it from President Trump's trade war, nonetheless 287,000 jobs could be lost in businesses targeted by Chinese tariffs threatened in response to U.S. tariff increases — more than any other state.

Noting that the two countries have great potential as future trade partners, Brown said "all you need is a great leader." Brown assured the business leaders that "this too will pass. I'm not telling you what I'm referring to."

Still, Americans find it easy to dismiss Brown as he is a politician. Which brings us to the point of this series of posts.

Economics are complicated and what you don't know about your competitor is the surest way to lose. The Chinese are planning for economic success through 2049. Most American companies are arguing over yesterday's P&L results.

Not all American business leaders discount long-term thinking or share the common American ideological bias against China. Now would be a good time to use the links at the beginning of this post to catch up to Warren Buffett on the matter of China. Oh, and you also can learn about the three redwoods in the first of those posts.

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