What China Rise Really Means – copy from Gallup Business Journal

I read this article a long time ago while I was opening my e mail early in the morning.  Then I tried to find it and re read it again.  I had a hard time to find it.  Finally I was able to scoope it out in their website.  I would like to share it here with you all.  This is the original article website: http://businessjournal.gallup.com/content/152012/China-Rise-Really-Means.aspx

Unless America gets its economic engine restarted and roaring, the world will have a whole new economic and political leader in the coming decades, says Gallup’s chairman

19 January 2012

by Jim Clifton

Excerpted from The Coming Jobs War

12>

Current economic predictions, with few if any dissenters, say that in the next 30 years, China’s GDP will grow to a total far larger than that of the United States. The total world GDP in 2010 was more than $60 trillion. Of that total, the United States has about $15 trillion, or what I will call a current global economic market share of about 25%. And China currently has a GDP of nearly $6 trillion, or a market share of about 10%.

All decisions between countries on the subjects of peace, trade, environment, borders, laws, and human rights would defer to China.

You might be wondering how India and Russia will do. They might do OK, but they’re starting too far back. India and Russia have GDPs approaching $1.5 trillion apiece. Almost nobody knows this because India and China are so often discussed in the same conversation, under the assumption that their GDPs are of similar size. Those who have been saying for 10 years that India is the one to watch, not China, are at least temporarily wrong. India might do well, but the country is getting routed by the Middle Kingdom.

Right now, China’s GDP is more than four times bigger than India’s. And it’s more than three times bigger than Russia’s and more than double Brazil’s. Japan is close to China at slightly more than $5 trillion, but Japan’s economy is even more stalled than America’s. Germany is next at $3.3 trillion. The United Kingdom is just over $2 trillion, and France is just over $2.5 trillion — and they are both stalled. And to review, the United States of America’s GDP is leading the world at about $15 trillion, but stalled, while China’s nearly $6 trillion GDP is on a historic, world-order-changing run of nearly 10% growth per year.

Over the next 30 years, with total global GDP growth of approximately 4% annually, GDP will likely grow to a total of $200 trillion. Virtually all economists I’ve read predict that China’s GDP will bounce to about $70 trillion by 2040 — a 35% market share of the entire world’s economy. Those economists predict that the U.S. GDP will be growing at an average of 2.5% to about $30 trillion, or 15% global market share in 2040.

When and if that happens, America loses. The world changes; everything changes. China may dominate the world. But it won’t have to use its military. When its GDP surpasses America’s, it will dominate the world economically by a margin far more than the United States currently has. At that point, China will be the new leader of the world. All decisions between countries on the subjects of peace, trade, environment, borders, laws, and human rights would defer to China. Because more than ever, the new golden rule applies: He who has the gold, rules. And the country with the dominant GDP has the gold and the good jobs.

It’s vital to understand all those GDP numbers because almighty jobs live in combination with GDP growth. Everything you just read will come true unless America gets its economic engine restarted and roaring. If not, it will slide into a new economic hell that few can imagine.

It might be hard to imagine, but there has been a preview of it in Detroit. If GDP and jobs continue to falter, a thousand big and little American cities will suddenly morph into a condition much like Detroit’s. They will have declining city GDP growth. Small and medium-sized businesses will close. Big companies will have to be taken over by Washington or foreign owners. Any company that can afford to will leave. There will be massive layoffs and no jobs to replace them, huge unaffordable city debt, a decreasing tax base for the government jobs that support the community, and devastating brain drain. Houses will be bulldozed. There will be increased corruption among government leaders — a citywide economic hell.

The United States will be overwhelmed by China unless there is an economic miracle.

Just a few decades ago, Detroit was one of the richest cities — and arguably the best city — in the world. It was a fantastic place to live and to run a wide variety of great businesses. But because of lousy local leadership and the rise of foreign competition, Detroit’s businesses, government, and all its community support systems, including schools — everything came off the rails. And lousy top leadership creates lousy leadership further down the chain. America lost one of the best cities in the world because Detroit lost in the competition for jobs to Japan and Germany.

What went wrong with the macroeconomics of Detroit?

Most of the blame probably could be assigned to the car companies’ short-sighted leadership, management, and vision; they managed as if the United States was going to be the undisputed world economic champion forever. They could make lousy cars because who cares? Everyone in the postwar world had to buy American anyway. Consumers had no choice.

The rest of the blame should be laid at the door of overly aggressive unions that knew they could have their way with the Big Three’s weak leadership. Unions make the wrong people the customers. They create organizations almost solely for the benefit of employees, not the marketplace. Neither management nor unions had the vision to see how they were making their home city noncompetitive in the new war for GDP and jobs. That’s the simplest summary.

$123,000,000,000,000

The idea of America turning into one big Detroit is not far-fetched when considering the prediction of the 1993 winner of the Nobel Prize for Economics, Robert Fogel. He said that by 2040, the Chinese economy will be right at $123 trillion. That’s more than three times the global economic output of 2000. China’s share will be 40%, America’s will be 14%, and the European Union’s will be 5%. “This is what economic hegemony will look like,” Fogel wrote in his article in Foreign Policy.

My own review of many economic calculations would say that Fogel was over-caffeinated as he ran his math, but he is a renowned and highly admired economist. In any case, virtually all the world’s most credible economists have China as a prohibitive favorite by huge spreads to beat the United States over the next 30 years. Literally no economist I could find thinks the United States will win the upcoming economic battle of its life.

So even if Fogel is close to right, even if his prediction comes almost true, it will be jobs Armageddon in America. Its unemployment plus underemployment will rise to more than 40%. Leadership of the free world will not be just lost, but overwhelmed.

And that’s the end for the American experiment in democracy. The history books will say it worked from 1776 to 2040 and then was overwhelmed by Chinese market-based communism.

Please take note: The United States will be overwhelmed by China unless there is an economic miracle. Americans are betting their entire country and the future of their children and their grandchildren on one big “unless.”

Tough Economy

The economy is so bad. I did not feel the pinch until yesterday.  One of Nicole’s skater friends’ mom e-mail me that she was so glued to the TV trying to find out what the Congress would decide to do with bailout of 3 big auto giants here.  But she said the news were depressed.  Congress refused to bailout.  Her company is in the "food chain".  So her company had already have several town hall meeting to warn employees of cutting down everything, from traveling, hiring freeze, take all possible PTO, no bonus, and eventually the work forece.  Before this, the other mom who works for bank already told me the nerous and stress of her work because of financial industry melt down.  Now this…  I never thought it would hit me so close.

 

My work is getting crazier.  One analysis after another one, never stop because senior management team wanted to stay on top what is going on, where to cut and which area they have to pay more intention.  My husband told me that his company issued the memo to ask them to pay more attention to auto related clients A/R.  Everybody feels the pinch now.  My husband said it would only get worse before it gets better.  I never thought we would experience 30′ crash, and crash this hard…

Laughing and Crying

By THOMAS L. FRIEDMAN

Published: May 23, 2007 – NY Times

 

First I had to laugh. Then I had to cry.

I took part in commencement this year at Rensselaer Polytechnic Institute, one of America’s great science and engineering schools, so I had a front-row seat as the first grads to receive their diplomas came on stage, all of them Ph.D. students. One by one the announcer read their names and each was handed their doctorate — in biotechnology, computing, physics and engineering — by the school’s president, Shirley Ann Jackson.

The reason I had to laugh was because it seemed like every one of the newly minted Ph.D.’s at Rensselaer was foreign born. For a moment, as the foreign names kept coming — “Hong Lu, Xu Xie, Tao Yuan, Fu Tang” — I thought that the entire class of doctoral students in physics were going to be Chinese, until “Paul Shane Morrow” saved the day. It was such a caricature of what President Jackson herself calls “the quiet crisis” in high-end science education in this country that you could only laugh.

Don’t get me wrong. I’m proud that our country continues to build universities and a culture of learning that attract the world’s best minds. My complaint — why I also wanted to cry — was that there wasn’t someone from the Immigration and Naturalization Service standing next to President Jackson stapling green cards to the diplomas of each of these foreign-born Ph.D.’s. I want them all to stay, become Americans and do their research and innovation here. If we can’t educate enough of our own kids to compete at this level, we’d better make sure we can import someone else’s, otherwise we will not maintain our standard of living.

It is pure idiocy that Congress will not open our borders — as wide as possible — to attract and keep the world’s first-round intellectual draft choices in an age when everyone increasingly has the same innovation tools and the key differentiator is human talent. I’m serious. I think any foreign student who gets a Ph.D. in our country — in any subject — should be offered citizenship. I want them. The idea that we actually make it difficult for them to stay is crazy.

Compete America, a coalition of technology companies, is pleading with Congress to boost both the number of H-1B visas available to companies that want to bring in skilled foreign workers and the number of employment-based green cards given to high-tech foreign workers who want to stay here. Give them all they want! Not only do our companies need them now, because we’re not training enough engineers, but they will, over time, start many more companies and create many more good jobs than they would possibly displace. Silicon Valley is living proof of that — and where innovation happens matters. It’s still where the best jobs will be located.

Folks, we can’t keep being stupid about these things. You can’t have a world where foreign-born students dominate your science graduate schools, research labs, journal publications and can now more easily than ever go back to their home countries to start companies — without it eventually impacting our standard of living — especially when we’re also slipping behind in high-speed Internet penetration per capita. America has fallen from fourth in the world in 2001 to 15th today.

My hat is off to Andrew Rasiej and Micah Sifry, co-founders of the Personal Democracy Forum. They are trying to make this an issue in the presidential campaign by creating a movement to demand that candidates focus on our digital deficits and divides. (See: http://www.techpresident.com.) Mr. Rasiej, who unsuccessfully ran for public advocate of New York City in 2005 on a platform calling for low-cost wireless access everywhere, notes that “only half of America has broadband access to the Internet.” We need to go from “No Child Left Behind,” he says, to “Every Child Connected.”

Here’s the sad truth: 9/11, and the failing Iraq war, have sucked up almost all the oxygen in this country — oxygen needed to discuss seriously education, health care, climate change and competitiveness, notes Garrett Graff, an editor at Washingtonian Magazine and author of the upcoming book “The First Campaign,” which deals with this theme. So right now, it’s mostly governors talking about these issues, noted Mr. Graff, but there is only so much they can do without Washington being focused and leading.

Which is why we’ve got to bring our occupation of Iraq to an end in the quickest, least bad way possible — otherwise we are going to lose Iraq and America. It’s coming down to that choice.

 

Censoring Truth

February 9, 2006

Editorial, New York Times

The Bush administration long ago secured a special place in history for the audacity with which it manipulates science to suit its political ends. But it set a new standard of cynicism when it allowed NASA’s leading authority on global warming to be mugged by a 24-year-old presidential appointee who, quite apart from having no training on that issue, had inflated his résumé.

In early December, James Hansen, the space agency’s top climate specialist, called for accelerated efforts to reduce industrial emissions of carbon dioxide and other gases linked to global warming. After his speech, he told Andrew C. Revkin of The Times, he was threatened with "dire consequences" if he continued to call for aggressive action.

This was not the first time Dr. Hansen had been rebuked by the Bush team, which has spent the better part of five years avoiding the issue of global warming. It was merely one piece of a larger pattern of deception and denial.

The administration has sought to influence the policy debate by muzzling the people who disagree with it or — as was the case with two major reports from the Environmental Protection Agency in 2002 and 2003 — editing out inconvenient truths or censoring them entirely.

In this case, the censor was George Deutsch, a functionary in NASA’s public affairs office whose chief credential appears to have been his service with President Bush’s re-election campaign and inaugural committee. On his résumé, Mr. Deutsch claimed a 2003 bachelor’s degree in journalism from Texas A&M, but the university, alerted by a blogger, said that was not true. Mr. Deutsch has now resigned.

The shocker was not NASA’s failure to vet Mr. Deutsch’s credentials, but that this young politico with no qualifications was able to impose his ideology on other agency employees. At one point, he told a Web designer to add the word "theory" after every mention of the Big Bang.

As Dr. Hansen observed, Mr. Deutsch was only a "bit player" in the administration’s dishonest game of politicizing science on issues like warming, birth control, forest policy and clean air. This from a president who promised in his State of the Union address to improve American competitiveness by spending more on science.

Some Assembly Needed: China as Asia Factory

By DAVID BARBOZA

New York Times, Feb 9, 2006

SHENZHEN, China — Hundreds of workers at a sprawling Japanese-owned Hitachi factory here are fashioning plates of glass and aluminum into shiny computer disks, wrapping them in foil. The products are destined for the United States, where they will arrive like billions of other items, labeled "made in China."

But often these days, "made in China" is mostly made elsewhere — by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks.

Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be. That kind of distortion is likely to appear again on Feb. 10, when the Commerce Department announces the American trade deficit with China. By many estimates, it swelled to a record $200 billion last year.

It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China.

American multinational corporations and other foreign companies, including retailers, are the largely invisible hands behind the factories pumping out these inexpensive goods. And they are reaping the bulk of profits from the trade.

Yasheng Huang, an associate professor at the Sloan School of Management at Massachusetts Institute of Technology, explained: "Basically, in the 1990’s, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China. But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."

The real losers, it seems, are mostly low-wage workers elsewhere, like the ones at Hitachi who lost their jobs in Japan, along with workers in other parts of Asia who suffered as employers began relocating plants to China. Blue-collar workers in the United States have also lost out.

Asian exports to the United States have actually slipped over the last 15 years. Factories in Taiwan used to assemble many of the world’s computers; now China does. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do. And Japanese plants once manufactured the most popular consumer electronics brands, like Sony, Panasonic and Toshiba; now many of these are shipped from Chinese ports.

In fact, about 60 percent of this country’s exports are controlled by foreign companies, according to Chinese customs data. In categories like computer parts and consumer electronics, foreign companies command an even greater share of control over the exports, analysts say.

Foreign expertise has been critical as manufacturing supply chains become increasingly complex, involving countries’ each producing components that are then shipped to China for assembly. Such a system can render global trade statistics misleading, and some experts say that a more apt label would be "assembled in China."

"The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that."

Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures.

"In a globalized world, bilateral trade figures are irrelevant," he argued. "The trade balance between the U.S. and China is as irrelevant as the trade balance between New York and Minnesota."

China’s supply of cheap labor, coupled with what is widely seen as a deliberately undervalued currency, helped some $465 billion in foreign direct investment flow into the country from 1995 to 2004, making it one of the hottest destinations in the world for foreign capital.

In the electronics industry, relocations to China have soared. A decade ago, Taiwan controlled the computer components market and relied on domestic manufacturing. Today, companies on Taiwan produce 80 percent of computer motherboards, 72 percent of notebook computers and 68 percent of L.C.D. monitors. And most of the assembly takes place in China.

"Everyone has moved to China," says Tony Yang, an executive at Aopen of Taiwan, a maker of computers and parts. "Our suppliers, our buyers, their main production facilities have all been relocated. Wages in Taiwan are just too high."

Japanese and South Korean companies are also here in force. Panasonic has 70,000 employees working in China; Toshiba’s largest information technology production site is in Hangzhou, a coastal city south of Shanghai. And Samsung has 23 factories, 50,000 employees and all of its notebook computer production in China. Its last computer notebook plant in South Korea closed last year.

The migration has left footprints in trade statistics. In 1990, Japan was the United States’ dominant trading partner in the Pacific, and Asia accounted for 38 percent of all American imports. Last year, China was the dominant Asian trader. Its trade with the United States has risen some 1,200 percent since 1990, even as the Asian share of American imports slipped to 36 percent.

What changed from 1990 to 2005 is that many goods became a lot cheaper as China took on a greater and greater role as the world’s basic factory floor.

Even as that shift was taking place, the more prosperous Asian countries retained and even expanded their influence in the global supply chain, designing more sophisticated models, making components, and carrying out marketing and brand management.

And so while China has something in the range of a $200 billion trade surplus with the United States, it also has a $137 billion trade deficit with the rest of Asia. This movement of goods, services and money has been uneven.

"I don’t think the developed world shifted that much work to Asia," said Vincent Chan, an analyst at Credit Suisse. "The places that have seen the most manufacturing disappear are Hong Kong and Taiwan."

American and European companies, particularly in autos and electronics, are moving more of their manufacturing to China. Dell personal computers used to be made primarily in the United States. Now, most are assembled in China.

Bigger multinationals could be on the way. Airbus is considering building passenger jets in China. And General Motors is weighing whether to export some cars it makes in this country.

Companies like Hitachi, here in Shenzhen, usually come to China because of cheap land and labor and a factory system where young workers essentially march to their jobs every eight hours, often from company-owned dormitories nearby.

"Most of our growth is now coming from China," said Dennis Rourk, general manager at the Hitachi plant here, which is expanding and creating a new supply chain for disk drives in the region. He said Hitachi had encouraged its suppliers to locate there, as well.

Thousands of factories have created millions of jobs for China’s low-wage migrant laborers, who earn about 75 cents an hour. But so far, Chinese companies in these industries have generally been unable to climb from basic manufacturing to design work and beyond.

Nonetheless, China’s rise as a world commercial power is in striking contrast to that of Japan in the 1980’s, when the Japanese were building their own brands like Toyota, Honda and Sony. China has few global brands beyond Lenovo and Haier — big companies struggling to make their names more widely known.

Chinese officials rarely miss an opportunity to argue that the trade statistics showing huge surpluses are misleading indicators of the country’s prosperity.

"What China got in the past few years is only some pretty figures," said Mei Xinyu, of the Commerce Ministry’s research institute. "American and foreign companies have gotten the real profit."

Still, the economy is booming, and an aggressive class of entrepreneurs is emerging at home that resembles the successful breed of overseas Chinese who built business empires during the 20th century.

Yin Mingshan, 68, a multimill- ionaire in the central city of Chongqing, is fashioning himself a Chinese Henry Ford. "We are the biggest exporter of motorcycles in China," he declared.

Mr. Yin started out selling books in the 1980’s, then engines and motorcycles in the 90’s. Today, his company, the Lifan Group, has opened a 3.6-million-square-foot factory. He says his next goal is to export cars to the United States.

"That’s how the Japanese got started," said Donald Brasher, who operates Global Trade Information Services. "Remember, in the 1950’s, the Japanese started exporting motorcycles. And 20 years later, it was cars."

Lifan is not alone among Chinese businesses. The Chery Automobile Company has plans to ship inexpensive cars to the American market in 2007. And last month, another carmaker, Geely said at the Detroit auto show that it was working on a small four-door sedan that it could sell in the United States for less than $10,000.

Mr. Yin’s instructive slogans are plastered on his factory’s facade, sometimes in big English-language letters. In an odd way, they echo the wall posters of the time of Mao Zedong and the Cultural Revolution, updated to reflect China’s emergence as a key player in a global economy.

They are meant to inspire the staff, he said, pointing to a slogan that read, "One who earns money in China is a winner; one who earns money overseas is a hero."

Billionaire Builder of China

By DAVID BARBOZA

December 29, 2005 – New York Times

SHANGHAI, Dec. 28 – There are only 10 known billionaires in China, and he is one of them. His name is Xu Rongmao, and he is no Donald Trump, Sam Zell or Mortimer Zuckerman. He’s bigger.

Mr. Xu, who is the chairman of the Shimao Group, controls much more land than any private developer in America and builds luxury real estate projects that put even Mr. Trump to shame for their sheer scale and flamboyance. But unlike the ubiquitous Mr. Trump – who is never at a loss for words and goes out of his way to attract the attention of cameras – Mr. Xu almost never grants interviews and is highly secretive about his operations.

For all his reserve, Mr. Xu, a former textile factory worker, is one of China’s wealthiest entrepreneurs and a prime example of the nation’s first generation of real estate tycoons. "I don’t know much about Mr. Xu, but Shimao has this uncanny ability to find the right projects at the right time," says Michael T. Hart, director of research in Shanghai at Jones Lang LaSalle, a real estate consulting firm. "Their North Bund project has one of the best views in all of Shanghai."

In a country that started permitting people to buy homes only in the 1980’s, developers like Mr. Xu (pronounced SHOO) found a way to gain rights to prime land in the nation’s biggest cities. Now they reap huge profits by building large residential projects, often with hotels and other commercial buildings.

An industry that emerged only a decade ago suddenly has annual sales of $130 billion, making real estate one of the biggest engines in this nation’s roaring economy.

The growth has helped propel Mr. Xu to No. 9 on the Forbes list of the richest people in China. With $1 billion in net assets, he runs two publicly listed real estate companies and a collection of private offshore companies, and is overseeing $9 billion in projects.

The Shimao Group is expected to complete building about 145 million square feet of property by 2010, more than the entire 120 million square feet controlled by Sam Zell of Chicago, the commercial real estate baron who is the biggest individual property owner in the United States.

By all accounts, Mr. Xu, who in his listed companies uses his Cantonese name, Hui Wing Mau, is a pioneer, willing to take big gambles. Through Shimao, he created one of China’s first luxury real estate brands. He bought prime land in Shanghai in the late 1990’s when others, fearing that the city was becoming overbuilt, were fleeing the market.

And now, with housing prices rising, the Shimao Group is so profitable that Goldman Sachs and Morgan Stanley are negotiating to take the company public in 2006.

Several of China’s other real estate tycoons share Mr. Xu’s rags-to-riches story. The developer of Shanghai’s new Citigroup building, for example, was once a truck driver from impoverished Jiangxi Province.

But little is known about Mr. Xu, 55, particularly how he earned his early fortune and developed his network of powerful political allies, who include several high-ranking Communist Party officials.

He turned down repeated requests for an interview for this article, as did many other major Chinese developers. Some privately admitted they simply did not want the publicity and scrutiny in a country still officially communist and uneasy about the creation of individual wealth.

"The nail that sticks up gets hammered," said Jack J. T. Huang, chairman of Asia for the law firm Jones Day, citing a common Chinese saying that is also popular in Japan and elsewhere in Asia. "No one wants to be that nail and talk about this kind of business."

Perhaps for good reason. China’s real estate industry, like those in many other places, has been dogged by scandal – tales of illegal land grabs, corruption, government bribery, shoddy construction work and the forced relocation of millions of peasants and urban poor.

Yet almost everyone with means in China these days seems to want to play the real estate game. Of the 50 richest Chinese, according to Forbes’s rankings in 2005, half rely on real estate as one of their primary businesses.

People who have worked with Mr. Xu, a sprightly looking man with well-groomed black hair, say that he leaped to the top after he bought a collection of distressed properties in Shanghai in the late 1990’s and began a huge riverfront development in the city’s Pudong district, where some apartments now sell for more than $4 million.

"He’s just smart," said one developer who spoke anonymously out of fear of angering government officials. "He got a lot of his land at ridiculously low prices, ridiculous. He knew where to go and when to buy."

Mr. Xu’s start was inauspicious. Like just about every person in China who came of age in Communist China, he started out poor. He grew up in Shishi, an entrepreneurial city in coastal Fujian Province, the oldest of eight children born to a machinery worker and a doctor.

After graduating from high school during the Cultural Revolution of 1966-76, he was sent to the countryside to work as a barefoot doctor. In the late 1970’s, he went to Hong Kong and worked in a textile factory. Then, he told friends, he got lucky and made a small fortune trading stocks.

By the mid-1980’s, he was investing in textile factories in western Gansu Province. His leap into real estate began in 1988 when he agreed to invest $1.2 million in a knitting factory in his hometown. Some say he intended all along to build a hotel instead, even though investments in private hotels were forbidden.

"He told others the construction was a factory," said Cai Shijia, a Fujian official who worked with Mr. Xu. "But the truth was, he was building a hotel.

"The construction on that land was all implemented according to hotel designs and standards. And as soon as the construction was completed, the government policy changed. Xu Rongmao became the owner of the first private three-star hotel in China."

Mr. Xu then plowed millions into developing residential complexes and resorts in Fujian.

Along the way, he struck up friendships with powerful political figures, including Fujian’s party secretary, Chen Guangyi, whom he had known in Gansu Province, and Jia Qingli, who succeeded Mr. Chen in Fujian before moving to Beijing to became a member of the Politburo. Mr. Xu recently met with Mr. Jia, who still holds a high position and was one of the highest-ranking Communist Party officials under Jiang Zemin, the former president.

For all his personal connections, people close to Mr. Xu say much of his success came from his willingness to take risks and his ability to spot opportunities ahead of others. When business dried up in Fujian, he moved his family to Australia, where he invested in real estate in the early 1990’s. Then he pushed his way into Beijing and Shanghai just before housing prices there took off.

He made money the same way other developers in China have: he negotiated with government officials to acquire cheap land, often with a small down payment, by limiting the commitment to a small initial phrase; then created a design for a new building that could serve as the template for a larger development.

"You can use Phase I cash to pay for Phase II or III," says one Shanghai developer who has observed Shimao’s projects. "It’s all about cash flow – it’s about how you use the money. That’s how these guys got off the ground. The early guys were visionaries and now they’re ridiculously wealthy." The system in China favors developers. Homebuyers pay far in advance of their move-in date, often more than a year ahead of construction. Developers often use that presale money to build the project or buy additional land elsewhere.

"That was one way to go from a small amount of money to making a lot of cash," said Mr. Hart at Jones Lang LaSalle. "Many of these guys weren’t necessarily good at developing, but they were in the right place at the right time."

Mr. Xu has worked the system to perfection. Following the money at Shimao, however, is difficult. Adapting a method honed to perfection by overseas Chinese, the Xu family controls a labyrinthine collection of public and private companies, official filings in China show, including offshore entities. The companies swap property, finance one another’s projects and seem to shift profits around.

For instance, the Shanghai Shimao Group, which is listed in Shanghai, said it had revenue of $280,000 in 2003 but profit of $16.3 million. A year later, revenue jumped to $134 million, with profit of $20 million.

And in one of many related-party transactions, Shimao International, a company listed in Hong Kong, said it bought 100 percent of a company called Value Added from Dynamic Keen Developments, which was wholly owned by Mr. Xu. Value Added owned a construction company set up by Mr. Xu to develop a project on the China-Russia border.

Avoiding investment bankers, two of his companies went public in Hong Kong and Shanghai a few years ago by acquiring listed companies and changing their names, in what is called a "back-door" listing. The bulk of the Shimao Group’s holdings would create a third company, which could go public soon.

Real estate experts here say many developers create project companies and engage in related-party transactions, partly for tax reasons. Indeed, Mr. Xu operates another Shimao company. One public filing says the "ultimate holding company" for Shimao’s pieces is a shell corporation created in the British Virgin Islands called Perfect Zone.

Shimao has acquired huge tracts of riverfront land in some of China’s biggest cities and has used it to build developments packed with signature features, including gardens, palm trees, villas and luxury high-rises outfitted with marble interiors.

In Harbin, Shimao acquired 43 million square feet in an area the city government is redeveloping, and then received approval to build a huge project north of Harbin, on both sides of the China-Russia border.

The project includes a casino that would operate just over the border in Russia, escaping the legal prohibition on gambling everywhere in China but Macao. Meanwhile, the government has begun an aggressive campaign to crack down on gambling elsewhere along its borders.

In Wuhan, Shimao outbid the Hong Kong billionaire Li Kai Shing and agreed to pay $380 million to develop 9.4 million square feet in the historic area of the provincial capital.

With the market slowing because of worries about a looming real estate bubble, Mr. Xu and his management team, which includes his son and daughter, are stepping up their investments. They have lined up international architects and five-star hotels to work with them.

People who work with Mr. Xu say he maintains his close ties to government officials and often makes large charitable donations to help stay in their good graces. When the chief executive of Warner Brothers Entertainment went to Beijing to meet Wu Yi, China’s vice prime minister, Mr. Xu was there, too. And he often visits with Prime Minister Wen Jiabao.

Next up for Shimao? An initial public stock offering in Hong Kong early next year, which could value the company at billions of dollars and catapult Mr. Xu to the No. 1 spot on China’s rich list.

The name his parents gave him, Xu Rongmao, seems apt: in Chinese, it can be translated as "Wealth and Success."

 

China Snubs Democracy

Editorial

November 23, 2005 – New York Times

Almost everywhere President Bush went in Asia last week, he proclaimed America’s support for democracy and human rights in China. And almost every time he did so, Chinese leaders either ignored him or changed the subject. Beijing even dispensed with the symbolic gestures that often accompany American presidential visits. None of the human rights cases Mr. Bush personally raised with China’s president, Hu Jintao, earlier this year have yet been resolved. Christians who tried to worship alongside Mr. Bush were turned away or detained. Prominent democracy advocates were confined to their homes for the duration of Mr. Bush’s stay.

Despite the lack of results, we applaud Mr. Bush for raising these sensitive but crucially important issues. Democracy and human rights are universal, not merely American, values. Beijing’s stonewalling on democracy is more than a diplomatic snub of Mr. Bush; it is an insult to China’s own people. One thing still reliably Communist about the Chinese Communist Party is its Stalinist repression of all political dissent.

Still, the ritualistic American preaching of democracy to China’s increasingly confident leaders has become less likely than ever to directly produce any useful effects. Washington’s international reputation has been battered by its invasion and botched occupation of Iraq, while China’s has been steadily rising on the basis of its phenomenal economic advance. Beijing’s leaders are in no mood to listen to lectures from an American government that depends on Chinese surpluses and savings to finance its supersized budget deficits.

The best way for America to advance democracy in China, as elsewhere, is by setting a positive and consistent example, at home and abroad. That is not something that the Bush administration has yet learned how to do, even after having made democracy the rhetorical centerpiece of its second-term foreign policy.

Fellow Republicans, Open Your Doors

By LINDA CHAVEZ

November 17, 2005 – New York Times

Purcellville, Va.

REPUBLICAN candidates hoping to make illegal immigration a central issue in next year’s Congressional elections and the 2008 presidential race should consider the results of the Virginia governor’s contest.

The Republican candidate, Jerry Kilgore, tried to tap into sentiment against illegal aliens by running advertisements that featured grainy video of border arrests and Hispanic men waiting in line while an announcer accused his Democratic opponent, Tim Kaine, of favoring "taxpayer benefits for illegal immigrants." In the last weeks of the race, Mr. Kilgore regularly worked the theme into his campaign speeches, especially in Northern Virginia, home to most of the state’s immigrant population, legal and illegal.

But on Election Day, immigration failed to galvanize voters, and Mr. Kilgore lost by six percentage points, coming up short even in reliably conservative areas like Loudoun County, where I live. No doubt other missteps, including harshly negative ads on his opponent’s position on the death penalty, contributed to Mr. Kilgore’s defeat. But clearly, immigrant bashing can cut both ways in an election.

Northern Virginia is home to about 200,000 illegal aliens. Jobs are plentiful, many of them good-paying ones in construction. Statewide unemployment is at 3.5 percent, lower than the 5 percent national average; but Northern Virginia is even lower at 2.5 percent. Legal immigrants in the area outnumber illegal ones by more than 2 to 1 (about the same proportion as they do nationally), but both groups have helped transform the region’s economy into one of the most robust in the nation.

Nationally, illegal immigrant males actually have higher labor force participation rates – 92 percent – than other groups (83 percent for native-born men and 82 percent for immigrant men overall). And they make up an increasingly large share of certain occupations. A survey last summer by the Pew Hispanic Center found that about a quarter of all drywall and ceiling tile installers in the United States are illegal aliens, a statistic confirmed by a visit to almost any construction site in the Virginia suburbs.

If these immigrant workers were to disappear tomorrow – as so many politicians and conservative talk-show hosts seem to desire – it would have a drastic and unwelcome effect on the economy here and around the country. Not only do these workers fill necessary jobs in a tight labor market, but they spend their wages largely in the communities in which they live and work, and most contribute their share of taxes as well (employers generally withhold from paychecks in these industries).

Unfortunately, buoyed by polls showing that most Americans (69 percent in a survey last year) say that they are concerned about illegal immigration, some Republicans are hoping to ride the issue into the White House. Representative Tom Tancredo of Colorado, the leader of the virtually all-Republican immigration reform caucus in the House, is spending time in Iowa, New Hampshire and South Carolina in anticipation of a possible presidential campaign. (Mr. Tancredo caused even some immigration hard-liners to wince when he tried to have a high school honors student and his family deported after a newspaper article about the boy noted that he entered the country illegally at age 12.)

The Senate majority leader, Bill Frist, also eyeing a presidential run, has e-mailed his supporters asking them to post messages on his Web site "showing support for a tough border bill." The National Republican Senatorial Committee contacted one million Republican voters asking them to respond to a survey on immigration that asked "where loyal Republicans like you stand on this critical issue." And there is even discussion among House Republicans to revoke the laws giving citizenship to children born in America to illegal-immigrant parents.

Yet most polls show that illegal immigration is way down on the list of concerns motivating most voters, and Republicans may be confusing the intensity of the small number of people for whom it is a top priority – usually about 10 percent of voters – with its overall appeal as an election issue.

None of this is to suggest that the status quo – some 11 million illegal aliens residing in the United States and more coming every day – is desirable. Border security is an important issue; indeed, it is too important for demagoguery. A terrorist or drug smuggler can just as easily cross a porous border as can a father hoping to support his family back home.

The best way to intercept the jihadists and criminals, however, would be to give hard-working laborers a realistic opportunity to come here legally – by enacting a more generous legal immigration law with a guest-worker option. Ideally, such a program would allow illegal aliens already here to participate after paying a fine and demonstrating that they have paid taxes and are gainfully employed.

Three Republican senators from border states – John McCain and Jon Kyl of Arizona and John Cornyn of Texas – have introduced bills that address these issues in various promising ways; and President Bush has outlined a similar, if somewhat vaguer, proposal. A poll conducted by the Kaiser Family Foundation and Harvard’s Kennedy School of Government last year showed that about 58 percent of Republican respondents supported a guest worker program.

Republican leaders have two choices: continue with the hard-line rhetoric that may or may not help at the polls, or enact market-based immigration reform that will give a chance to those willing to work hard for a better America.

Linda Chavez, president of the Center for Equal Opportunity, was the director of the United States Commission on Civil Rights under President Ronald Reagan.

Philosophers Notwithstanding, Kansas School Board Redefines Science

By DENNIS OVERBYE

November 15, 2005 – New York Times

Once it was the left who wanted to redefine science.

In the early 1990’s, writers like the Czech playwright and former president Vaclav Havel and the French philosopher Bruno Latour proclaimed "the end of objectivity." The laws of science were constructed rather than discovered, some academics said; science was just another way of looking at the world, a servant of corporate and military interests. Everybody had a claim on truth.

The right defended the traditional notion of science back then. Now it is the right that is trying to change it.

On Tuesday, fueled by the popular opposition to the Darwinian theory of evolution, the Kansas State Board of Education stepped into this fraught philosophical territory. In the course of revising the state’s science standards to include criticism of evolution, the board promulgated a new definition of science itself.

The changes in the official state definition are subtle and lawyerly, and involve mainly the removal of two words: "natural explanations." But they are a red flag to scientists, who say the changes obliterate the distinction between the natural and the supernatural that goes back to Galileo and the foundations of science.

The old definition reads in part, "Science is the human activity of seeking natural explanations for what we observe in the world around us." The new one calls science "a systematic method of continuing investigation that uses observation, hypothesis testing, measurement, experimentation, logical argument and theory building to lead to more adequate explanations of natural phenomena."

Adrian Melott, a physics professor at the University of Kansas who has long been fighting Darwin’s opponents, said, "The only reason to take out ‘natural explanations’ is if you want to open the door to supernatural explanations."

Gerald Holton, a professor of the history of science at Harvard, said removing those two words and the framework they set means "anything goes."

The authors of these changes say that presuming the laws of science can explain all natural phenomena promotes materialism, secular humanism, atheism and leads to the idea that life is accidental. Indeed, they say in material online at kansasscience2005.com, it may even be unconstitutional to promulgate that attitude in a classroom because it is not ideologically "neutral."

But many scientists say that characterization is an overstatement of the claims of science. The scientist’s job description, said Steven Weinberg, a physicist and Nobel laureate at the University of Texas, is to search for natural explanations, just as a mechanic looks for mechanical reasons why a car won’t run.

"This doesn’t mean that they commit themselves to the view that this is all there is," Dr. Weinberg wrote in an e-mail message. "Many scientists (including me) think that this is the case, but other scientists are religious, and believe that what is observed in nature is at least in part a result of God’s will."

The opposition to evolution, of course, is as old as the theory itself. "This is a very long story," said Dr. Holton, who attributed its recent prominence to politics and the drive by many religious conservatives to tar science with the brush of materialism.

How long the Kansas changes will last is anyone’s guess. The state board tried to abolish the teaching of evolution and the Big Bang in schools six years ago, only to reverse course in 2001.

As it happened, the Kansas vote last week came on the same day that voters in Dover, Pa., ousted the local school board that had been sued for introducing the teaching of intelligent design.

As Dr. Weinberg noted, scientists and philosophers have been trying to define science, mostly unsuccessfully, for centuries.

When pressed for a definition of what they do, many scientists eventually fall back on the notion of falsifiability propounded by the philosopher Karl Popper. A scientific statement, he said, is one that can be proved wrong, like "the sun always rises in the east" or "light in a vacuum travels 186,000 miles a second." By Popper’s rules, a law of science can never be proved; it can only be used to make a prediction that can be tested, with the possibility of being proved wrong.

But the rules get fuzzy in practice. For example, what is the role of intuition in analyzing a foggy set of data points? James Robert Brown, a philosopher of science at the University of Toronto, said in an e-mail message: "It’s the widespread belief that so-called scientific method is a clear, well-understood thing. Not so." It is learned by doing, he added, and for that good examples and teachers are needed.

One thing scientists agree on, though, is that the requirement of testability excludes supernatural explanations. The supernatural, by definition, does not have to follow any rules or regularities, so it cannot be tested. "The only claim regularly made by the pro-science side is that supernatural explanations are empty," Dr. Brown said.

The redefinition by the Kansas board will have nothing to do with how science is performed, in Kansas or anywhere else. But Dr. Holton said that if more states changed their standards, it could complicate the lives of science teachers and students around the nation.

He added that Galileo – who started it all, and paid the price – had "a wonderful way" of separating the supernatural from the natural. There are two equally worthy ways to understand the divine, Galileo said. "One was reverent contemplation of the Bible, God’s word," Dr. Holton said. "The other was through scientific contemplation of the world, which is his creation.

"That is the view that I hope the Kansas school board would have adopted."

America’s Future Is Stuck Overseas

By STUART ANDERSON

November 16, 2005 – New York Times

ACCORDING to a recent survey, more foreign graduate students enrolled in American universities this year than last, but their numbers remain far lower than they were in 2002. That international graduate student enrollment is no longer declining is welcome news. But it should not distract us from the obstacles the United States still faces in attracting top talent to its shores.

Foreign graduate students, particularly those who study science or engineering, are a boon to the American economy and education system. They are critical to the United States’ technological leadership in the world economy: according to a study by Keith Maskus, an economist at the University of Colorado, for every 100 international students who receive science or engineering Ph.D.’s from American universities, the nation gains 62 future patent applications. International students have founded many of America’s most innovative companies, including Sun Microsystems and Intel.

Moreover, without international students, certain science and engineering programs could not be offered at many American universities, because the foreign students populate classes and serve as teaching assistants. They also go on to supply faculty for those programs. About one-third of America’s engineering professors are foreign-born.

Although it’s easy to blame tightened post-9/11 visa policies for stagnating or declining international student enrollment figures, other factors have contributed to this unfortunate trend. Among them are fierce competition for students with Britain, Japan and other countries; improvements in the economies and universities of China and India, the countries that send the largest number of students here; the cost of an American education; and a perception that the United States is not interested in attracting international students.

Finally, and perhaps most avoidably, the United States makes it exceedingly difficult for our foreign-born science and engineering doctorates to stay in the country, where they might work in our private sector, conduct research in our labs or teach at our universities. It can take two years or more to gain permanent residency, and there are significant backlogs in applications for employment-based green cards.

The good news is that relatively small changes in current policies can redress these problems. The recent Senate-passed budget bill is a step in the right direction: it expands the number of employment-based green cards and temporary visas available to highly skilled foreigners. But the Bush administration should build on that by offering employers the option of paying a fee to expedite the processing of their employees’ applications, bringing processing time down to 30 to 60 days rather than the current two to four years.

Furthermore, Congress should eliminate the requirement that visa-seekers pursuing advanced degrees in the United States demonstrate that they will return to their home country. And a single, accountable administration official should coordinate policy and act as an ombudsman on international student issues, balancing admissions and security needs.

American universities, meanwhile, need to step up marketing efforts abroad if they wish to lure more students to their programs. Working with industry and government, universities should develop a marketing strategy that conveys the message that America is the world’s best place to study. The United States can even provide some of its assistance to developing countries in the form of need-based vouchers to qualified international students who wish to study at American universities.

We still have a chance to improve our policies and enhance our standing with prospective graduate students abroad. If we don’t seize it, America may lose its place as the global leader in science and technology.

Stuart Anderson, the executive director of the National Foundation for American Policy, was the executive associate commissioner for policy and planning at the Immigration and Naturalization Service from 2001 to 2003