4 ms·

Oil price shock means China is at risk of blowing up

12 points by iamelgringo 18y ago

geuis 18y ago
So my opinion is not one that many people necessarily agree with. Good. China needs to be knocked back a couple of pegs. We have been looking at nearly 1/6th of the population of the world controlled by an incredibly repressive regime and most of their citizens aren't even aware of how restricted they are. I also look at this from the perspective of an engineer. How in the history of the world did we ever get to a point where it was cheaper to ship parts from the U.S. to China for assembly and then back to the U.S. than to do all of the manufacture here at home? The shear amount of energy that has been expended has been ridiculous. All of the cheap cash inflow into China has fueled the massive growth of very inefficient coal plants throughout the country by the thousands. The people in China have energy needs, but because of the disregard and corruption of the government they have been polluting themselves in the headlong rush to catch up to the Western world. The system of global trade that has emerged over the last 20-30 years is an extremely inefficient system that needs to undergo some serious refactoring. This will result in some major temporary economic disruption across the world, but we'll all be better for it in the end.
- antiismist 18y ago
  Because of containerization it is super-cheap to ship things. For example, the Emma Mærsk can ship 11,000+ containers and requires a crew of only 13 people. It is powered by a single diesel engine, and has special drag-reducing paint on it's hull. Once in port all of the cargo can be offloaded and on the move in under 24 hours - they don't sit in warehouses anymore. There is an army of things like this cruising the oceans, and that is why shipping is so inexpensive. So in fact the global system of trade at has emerged in the post WWII era is ultra-efficient and ultra-competitive.
- drcode 18y ago
  We won't be better in the end- All crude that can be extracted will still be extracted and burned in an engine. Furthermore, if China's economy goes downhill they'll never cut back on their coal burning. Also, they aren't polluting themselves because of "government corruption" but because they have no other avenue to economic growth. A democracy in their position would act no different. I'm not sure it helps anyone or anything if China "gets knocked back a couple of pegs." This isn't a game of cribbage where the US "wins" because the other guy's peg got knocked back a couple of notches. If they lose, we lose. The reason we have our high standard of living is because we've been mooching off the Chinese population's cheap labor for our consumables all this time. The only way the world will burn less oil is if there isn't enough left to burn- Not because the "nice guys" win and will chose to stop polluting... there are no "nice guys".
  - helveticaman 18y ago
    China is a little too 1984 for my tastes. It's not as bad as North Korea, a literal 1984 society, but it's pretty awful.
    - michaelneale 18y ago
      Having traveled there a few times it doesn't "feel" that way (or perhaps it is hard to detect the surveillance !).
- harshavr 18y ago
  >>China needs to be knocked back a couple of pegs. We have been looking at nearly 1/6th of the population of the world controlled by an incredibly repressive regime For this point to have any validity, you'll need to have a strong argument that a smaller rate of economic growth will lead to more political freedom. This is not at all clear as the present regime has held onto power through many crises. On the other hand, an economic slowdown might very well mean that fewer people coming to the cities to look for a job will find one and an oil price price hike leading to an increase in the price of basic commodities might directly hit some of the poorest in a bad way. A significant humanitarian effect, without a political upheaval.
hugh 18y ago
One thing I've wondered: why aren't there more factories in Mexico? With low wages, high unemployment, semi-skilled workers, lax environmental laws and easy access to the world's largest market it would seem to be an ideal place to outsource manufacturing to. What does China have that Mexico doesn't?
- icey 18y ago
  Population density.
- tx 18y ago
  China has enormous manufacturing "support system": they have (or have had) plenty of cheap electricity, cheap oil and other resources - they're right next to Russia with its vast supplies of everything. Add to that cheap transportation (railroad) reaching huge European market, while still serving Asian market as well. Moreover, Chinese labor is still cheaper than anything in Latin America. Did I also mention that ecology constraints in China are close to non-existent? Mexico doesn't have the scale of China nor Chinese location: it probably is better suited for US market but that's about it.
- drcode 18y ago
  Good question- I would guess that it's due to Mexican government mismanagment. Factories need infrastructure to support them and Mexico hasn't been able to get that into place due primarily to corruption and inefficiency. China has a culture of relatively efficient bureaucracy. This means that if a part of the country needs more water, electricity, rails, etc. to support factories, they get it. I bet now that Mexico's institutions are becoming more modern and since they have less transportation expenses to the US this will change very quickly and Mexico will be a manufacturing hotspot.
- ardit33 18y ago
  sorry hugh, I downvoted you accidentally, I ment to upvote your post. I have had the same question too.
  - icey 18y ago

12 points by iamelgringo 18y ago

geuis 18y ago

So my opinion is not one that many people necessarily agree with. Good. China needs to be knocked back a couple of pegs. We have been looking at nearly 1/6th of the population of the world controlled by an incredibly repressive regime and most of their citizens aren't even aware of how restricted they are. I also look at this from the perspective of an engineer. How in the history of the world did we ever get to a point where it was cheaper to ship parts from the U.S. to China for assembly and then back to the U.S. than to do all of the manufacture here at home? The shear amount of energy that has been expended has been ridiculous. All of the cheap cash inflow into China has fueled the massive growth of very inefficient coal plants throughout the country by the thousands. The people in China have energy needs, but because of the disregard and corruption of the government they have been polluting themselves in the headlong rush to catch up to the Western world. The system of global trade that has emerged over the last 20-30 years is an extremely inefficient system that needs to undergo some serious refactoring. This will result in some major temporary economic disruption across the world, but we'll all be better for it in the end.

antiismist 18y ago
Because of containerization it is super-cheap to ship things. For example, the Emma Mærsk can ship 11,000+ containers and requires a crew of only 13 people. It is powered by a single diesel engine, and has special drag-reducing paint on it's hull. Once in port all of the cargo can be offloaded and on the move in under 24 hours - they don't sit in warehouses anymore. There is an army of things like this cruising the oceans, and that is why shipping is so inexpensive. So in fact the global system of trade at has emerged in the post WWII era is ultra-efficient and ultra-competitive.
drcode 18y ago
We won't be better in the end- All crude that can be extracted will still be extracted and burned in an engine. Furthermore, if China's economy goes downhill they'll never cut back on their coal burning. Also, they aren't polluting themselves because of "government corruption" but because they have no other avenue to economic growth. A democracy in their position would act no different. I'm not sure it helps anyone or anything if China "gets knocked back a couple of pegs." This isn't a game of cribbage where the US "wins" because the other guy's peg got knocked back a couple of notches. If they lose, we lose. The reason we have our high standard of living is because we've been mooching off the Chinese population's cheap labor for our consumables all this time. The only way the world will burn less oil is if there isn't enough left to burn- Not because the "nice guys" win and will chose to stop polluting... there are no "nice guys".
- helveticaman 18y ago
  China is a little too 1984 for my tastes. It's not as bad as North Korea, a literal 1984 society, but it's pretty awful.
  - michaelneale 18y ago
    Having traveled there a few times it doesn't "feel" that way (or perhaps it is hard to detect the surveillance !).
harshavr 18y ago
>>China needs to be knocked back a couple of pegs. We have been looking at nearly 1/6th of the population of the world controlled by an incredibly repressive regime For this point to have any validity, you'll need to have a strong argument that a smaller rate of economic growth will lead to more political freedom. This is not at all clear as the present regime has held onto power through many crises. On the other hand, an economic slowdown might very well mean that fewer people coming to the cities to look for a job will find one and an oil price price hike leading to an increase in the price of basic commodities might directly hit some of the poorest in a bad way. A significant humanitarian effect, without a political upheaval.

hugh 18y ago

One thing I've wondered: why aren't there more factories in Mexico? With low wages, high unemployment, semi-skilled workers, lax environmental laws and easy access to the world's largest market it would seem to be an ideal place to outsource manufacturing to. What does China have that Mexico doesn't?

icey 18y ago
Population density.
tx 18y ago
China has enormous manufacturing "support system": they have (or have had) plenty of cheap electricity, cheap oil and other resources - they're right next to Russia with its vast supplies of everything. Add to that cheap transportation (railroad) reaching huge European market, while still serving Asian market as well. Moreover, Chinese labor is still cheaper than anything in Latin America. Did I also mention that ecology constraints in China are close to non-existent? Mexico doesn't have the scale of China nor Chinese location: it probably is better suited for US market but that's about it.
drcode 18y ago
Good question- I would guess that it's due to Mexican government mismanagment. Factories need infrastructure to support them and Mexico hasn't been able to get that into place due primarily to corruption and inefficiency. China has a culture of relatively efficient bureaucracy. This means that if a part of the country needs more water, electricity, rails, etc. to support factories, they get it. I bet now that Mexico's institutions are becoming more modern and since they have less transportation expenses to the US this will change very quickly and Mexico will be a manufacturing hotspot.
ardit33 18y ago
sorry hugh, I downvoted you accidentally, I ment to upvote your post. I have had the same question too.
- icey 18y ago