Byline: Shanghai
I don’t need to write a travel log, people like Dave Barry and Ian Buruma do a much better job. If I were to write a travel log, it would be much more like Dave Barry. Everytime I see a new building with a giant lobby, I jokingly suggest that the whole building was erected just so there could be a fancy new restaurant. The Chinese love to eat and they love gigantic fancy restaurants.
Shanghai has become a city in the past twenty years, thanks to Deng Xiaoping. There are over a hundred thousand two story residential buildings, tens of thousands of new 4-6 story residential (six stories is the maximum walk-up) buildings, many thousands of new 20-40 story residential buildings and a few thousand new 40-60 story commercial buildings scattered over forty square miles. Most noticeable are a few hundred buildings of 70-100 stories. At the current rate of growth in buildings, the city will look more like Hong Kong and Manhattan than like any other city.
Travel logs can’t help but describe, scream about and elaborate on the low low prices of everything in the markets and the abundance of goods. (Subways are 25 cents, roundtrip to the airport on the Mag-Lev train is $10). My job is to explain why everything is so cheap.
The cheapness of so many goods in China allows Chinese to buy everything they have dreamed of: clothing, shoes, abundant food, fridges, washing machines, running hot water, toilets, bicycles and in many cases, autos. Great sharing and distributing of resources.
Everything is cheap because China has linked their RMB currency to the dollar directly. ($1 equals 12.5 RMB) President Bush has complained, mildly, that the RMB should be freed from the dollar. The complaints will grow in the future.
Tying the RMB to the dollar means everything that is imported to China is expensive and everything that is sold locally and exported is cheap, cheap, cheap. China also forces all foreign companies to manufacture in China, usually with a Chinese partner.
What are the consequences of this policy of tying the RMB to the dollar?
The Chinese get to buy everything local cheaply but individuals have little money to spend on high priced imports. The money China earns from an export driven economy is used to build the tens of thousands of 20-40 story residential buildings everywhere for the Chinese to live in, and the thousands of tall commercial buildings to promote industry. Chinese are getting the housing and industry they want.
The world benefits from cheap Chinese goods and one great consequence is near zero inflation. On the otherhand the costs of building supplies, steel and energy (read oil and gas) rise rapidly around the world. S.F. Bay Area residents will pay in the form of $ billions extra for the cost of the steel in the new Bay Bridge. China is nearly using up all the scrap steel on the planet.
One of the commercial strokes of genius in this picture is Wal-Mart, which plans to open hundreds of stores in China and already has dozens. That genius now allows Wal-Mart to sell the Chinese consumers low cost local goods directly, without importing and to use Wal-Mart's profits to build thousands of acres of Wal-Mart owned buildings in China.
Ikea, with a store in Beijing and Shanghai is following in the same path.