This week, Xinhua reported that the new four-year education plan will extend compulsory nine-year education to 98 percent of children in China’s 410 poorest counties.
In 2004, children in those counties received an average of 6.7 years of education each – hardly enough to prepare them to work in today’s industrialized China.
Today, the agency reports, nine year education covers 368 of those 410 counties
These counties are mostly located in hard-to-reach mountainous areas.
To solve this problem, local governments are setting up boarding schools for junior-high level students so that they can get a state-of-the art education.
According to Xinhua, the central government allocated 10 billion yuan (1.3 billion U.S. dollars) between 2004 and 2007 to build over 7,600 boarding schools, serving about four million students in a total of 953 counties in western China.
I recently visited one such boarding school in the Sichuan province, just east of the city of Chengdu, on the western side of Longquan mountain. This is the Longquanyi district, home of the “Golden Phoenix” project – junior high school students get free housing, school uniforms and a food allowance, and attend an urban boarding school in Longquan.
More than 3,000 students have already moved from their mountain villages to the city for their educations, almost two-thirds of them subsidized by the government. The district government has already spent 14.5 million yuan on the project, and will spend another 160 million.
School officials told me that 42 percent of the district is located in the poor, mountainous parts of the province. In 2006, all middle schools and high schools located in the poor regions were closed down, and the students transferred to central, urban schools. Often, their parents moved to town as well, and got city jobs.
At the Longquan junior high boarding school I visited, the building was surrounded by new construction projects – the district continues to invest in student education. Classes were large – over 50 students per class – and both the classrooms and dorm rooms were unheated. However, this is typical for a southern Chinese city. Even in Shanghai, classrooms tend to be unheated.
The school had a huge outdoor sports field, covered with artificial turf, where students exercised. There were computer labs, and English language classes. And central plumbing.
Students and teachers all carried magnetic stripe cards which they ran through card readers to get their lunches – tofu and vegetables, slapped onto metal trays. Students bussed their own tables.
Longquan is a high-tech development district, with over half a million people. The high tech parts are in the urban areas, of course.
Now these students will have a shot at the urban jobs.
The hillsides that they used to farm will probably revert to forest, as the district finds tourism more profitable than trying to grow crops on a mountain.
I also visited some of the farms in one of the mountainous parts of Sichuan, near Yibin, and the plots of land are tiny, terraced into the hillsides. All the labor is manual – it would be difficult to get a weed-wacker up these hills, much less a tractor or a combine.
By getting a decent education, the children of these poor farm families will get a chance at a better life – and employers will be able to benefit from having a more trained workforce.
Thursday, November 29, 2007
Thursday, November 22, 2007
China Putting Teeth in Environmental Regulations
This year, Chinese officials began putting some sharp teeth to the country’s environmental regulations.
This can have significant implications for the economy – last week, the World Bank calculated that air pollution alone is costing China 3.8 percent of its GDP. Adding in water pollution and non-health impacts of pollution raises that estimate to about 5.8 percent of GDP – a total of about $100 billion.
Last month, health officials said last that birth defects in China had increased by nearly 40 percent since 2001, in part as a result of environmental degradation, according to the state-owned China Daily newspaper.
Jin Yinlong, a researcher at the Center for Disease of Control and Prevention told the National Forum on Environment and Health in Beijing, that water pollution accounted for 59 percent of 600,000 complaints registered last year.
Zhou Zhengxian, director of the State Environmental Protection Administration, told Xinhua this week that local regions will be assigned pollution caps – those that exceed those caps would not be allowed to embark on new potentially polluting projects.
In 2009, enterprises would be required to get environmental permits before discharging byproducts into the environment.
Enterprises that do not meet discharge requirements or are found guilty of other environmental regulations would be refused permission to list on the stock market, he added, and companies that are already listed must open their environmental records to the public.
In rural areas, sewage systems will be upgraded and the use of chemical fertilizers reduced, with all new or renovated poultry farms required to pass environmental assessments.
By 2010, he said, 70 percent of all urban sewage will be processed before being discharged.
"From a long-term perspective, our target for China's rivers is to resume their natural appearance," he told Xinhua.
In July, a new policy required local authorities in areas along the four major rivers to prioritize the environment over the economy.
Some of the new measures are already having an effect.
According to Xinhua, in the first three quarters of this year, emissions of sulfur dioxide - the major air pollutant - hit 19.06 million tons, down 1.81 percent year on year. Chemical oxygen demand - a key water pollution index - was 10.44 million tons, down 0.28 percent.
Last year, a survey showed that surface water was generally affected by "medium pollution," and a full third of samples of surface water were graded "worst polluted."
Putting new teeth in environmental regulations is just half the battle, however.
The government also needs to allow non-governmental watchdog groups – non-profit organizations, educational and research institutions, and media groups – to take a more active role in monitoring violations.
Private companies, state-owned enterprises and government agencies must all be subject to public scrutiny – and the criticism that sometimes comes with it.
Public criticism doesn’t always make for a perfectly harmonious society, but it could lead to a cleaner and healthier society – and create more harmony in the long term.
This can have significant implications for the economy – last week, the World Bank calculated that air pollution alone is costing China 3.8 percent of its GDP. Adding in water pollution and non-health impacts of pollution raises that estimate to about 5.8 percent of GDP – a total of about $100 billion.
Last month, health officials said last that birth defects in China had increased by nearly 40 percent since 2001, in part as a result of environmental degradation, according to the state-owned China Daily newspaper.
Jin Yinlong, a researcher at the Center for Disease of Control and Prevention told the National Forum on Environment and Health in Beijing, that water pollution accounted for 59 percent of 600,000 complaints registered last year.
Zhou Zhengxian, director of the State Environmental Protection Administration, told Xinhua this week that local regions will be assigned pollution caps – those that exceed those caps would not be allowed to embark on new potentially polluting projects.
In 2009, enterprises would be required to get environmental permits before discharging byproducts into the environment.
Enterprises that do not meet discharge requirements or are found guilty of other environmental regulations would be refused permission to list on the stock market, he added, and companies that are already listed must open their environmental records to the public.
In rural areas, sewage systems will be upgraded and the use of chemical fertilizers reduced, with all new or renovated poultry farms required to pass environmental assessments.
By 2010, he said, 70 percent of all urban sewage will be processed before being discharged.
"From a long-term perspective, our target for China's rivers is to resume their natural appearance," he told Xinhua.
In July, a new policy required local authorities in areas along the four major rivers to prioritize the environment over the economy.
Some of the new measures are already having an effect.
According to Xinhua, in the first three quarters of this year, emissions of sulfur dioxide - the major air pollutant - hit 19.06 million tons, down 1.81 percent year on year. Chemical oxygen demand - a key water pollution index - was 10.44 million tons, down 0.28 percent.
Last year, a survey showed that surface water was generally affected by "medium pollution," and a full third of samples of surface water were graded "worst polluted."
Putting new teeth in environmental regulations is just half the battle, however.
The government also needs to allow non-governmental watchdog groups – non-profit organizations, educational and research institutions, and media groups – to take a more active role in monitoring violations.
Private companies, state-owned enterprises and government agencies must all be subject to public scrutiny – and the criticism that sometimes comes with it.
Public criticism doesn’t always make for a perfectly harmonious society, but it could lead to a cleaner and healthier society – and create more harmony in the long term.
Friday, November 16, 2007
The New Chinese Farmer
During my trip to Sichuan last week, I met several successful Chinese farmers. The main reason for their success, however, was that they weren’t actually farmers any more. Instead, they were construction contractors, or operated tourism resorts.
It’s hard to run a small family farm anywhere in the world, and China is no exception.
My home is in Massachusetts, where my in-laws used to run a family dairy farm, with about 100 head of cattle on 90 acres of land. They shut down operations quite a while back, to take regular “city” jobs, and the only thing left to remind us of the farm are a couple of baby cows and a barn full of unused milking machinery.
The reason is that it takes either massive economies of scale or a very high-end, niche product to make a living as a farmer these days.
The tiny plots owned by most farmers don’t lend themselves to economies of scale. We could see by the ditches and other obstacles separating fields that there hasn’t been much thought given to bringing in tractors or other mechanized equipment. And everywhere we went we could see people doing manual labor in the fields. Selling your plot to the farmer next door so that the fields can be combined is an option in other countries, but not in China – farmers don’t own their land here, they rent it from the government. And, since they don’t own the land, they can’t borrow against it in order to buy machinery.
And the problem with making a high-end, niche product is that marketing is a bear. The people who can pay for high-end organic produce or gourmet cheeses are on the coast, far from the farmers themselves.
Local governments are doing their best to solve both of these problems. For example, farmers are allowed to sublease their lands to agricultural businesses. They get a little income for their land, and then either work for those businesses directly or go into the cities to find jobs. Other initiatives include farmers’ cooperatives, where farmers pool their lands in order to engage in agriculture on a larger, more efficient scale. Both businesses and cooperatives are able to engage in more marketing activity than individual farmers, as well. There are also marketing initiatives, such as an organic food certification program.
Chinese farmers could use a few million tractors, combines, harvesters, balers, fence post diggers – you name it, they need it. In theory, there should be plenty of opportunities for farm equipment manufacturers and distributors. But it will take a few more reforms before the average farmer in China can afford to buy them.
Eventually, most of these farms will be gone. A few family plots will probably remain, tended on weekends or holidays. The rest will turn into retirement homes, vacation resorts, parklands – or industrial-sized factory farms.
It will be sad to see a way of life disappear. But, like many traditions, family farming looks best from a far distance. Up close, the work is dangerous, grueling, and ill-paid.
Meanwhile, if you want to see rice paddies, hand-tended plots of cabbages, tiny fields painstakingly terraced into hillsides, and the absolute quite that comes from not having any machinery around, do take a trip to western China before it’s all gone.
It’s hard to run a small family farm anywhere in the world, and China is no exception.
My home is in Massachusetts, where my in-laws used to run a family dairy farm, with about 100 head of cattle on 90 acres of land. They shut down operations quite a while back, to take regular “city” jobs, and the only thing left to remind us of the farm are a couple of baby cows and a barn full of unused milking machinery.
The reason is that it takes either massive economies of scale or a very high-end, niche product to make a living as a farmer these days.
The tiny plots owned by most farmers don’t lend themselves to economies of scale. We could see by the ditches and other obstacles separating fields that there hasn’t been much thought given to bringing in tractors or other mechanized equipment. And everywhere we went we could see people doing manual labor in the fields. Selling your plot to the farmer next door so that the fields can be combined is an option in other countries, but not in China – farmers don’t own their land here, they rent it from the government. And, since they don’t own the land, they can’t borrow against it in order to buy machinery.
And the problem with making a high-end, niche product is that marketing is a bear. The people who can pay for high-end organic produce or gourmet cheeses are on the coast, far from the farmers themselves.
Local governments are doing their best to solve both of these problems. For example, farmers are allowed to sublease their lands to agricultural businesses. They get a little income for their land, and then either work for those businesses directly or go into the cities to find jobs. Other initiatives include farmers’ cooperatives, where farmers pool their lands in order to engage in agriculture on a larger, more efficient scale. Both businesses and cooperatives are able to engage in more marketing activity than individual farmers, as well. There are also marketing initiatives, such as an organic food certification program.
Chinese farmers could use a few million tractors, combines, harvesters, balers, fence post diggers – you name it, they need it. In theory, there should be plenty of opportunities for farm equipment manufacturers and distributors. But it will take a few more reforms before the average farmer in China can afford to buy them.
Eventually, most of these farms will be gone. A few family plots will probably remain, tended on weekends or holidays. The rest will turn into retirement homes, vacation resorts, parklands – or industrial-sized factory farms.
It will be sad to see a way of life disappear. But, like many traditions, family farming looks best from a far distance. Up close, the work is dangerous, grueling, and ill-paid.
Meanwhile, if you want to see rice paddies, hand-tended plots of cabbages, tiny fields painstakingly terraced into hillsides, and the absolute quite that comes from not having any machinery around, do take a trip to western China before it’s all gone.
Thursday, November 8, 2007
There's Something About Chengdu
Earlier this week, I asked Ge Honglin, the mayor of Chengdu, what incentives his city had to offer foreign companies wishing to relocate here.
Can companies get subsidies? Low-interest loans? Tax breaks?
His answer surprised me. I expected a few vague promises, maybe some obfuscations, some exaggerations.
I got none of that.
"Frankly, Chengdu can't offer the same kinds of incentives as some other cities are offering," he told a room full of visiting foreign journalists.
Yang is a technocrat. He started out his career as an engineer, and seems not to have learned the art of hype and public relations. Instead, he tells it like it is.
At the Bookworm the next night – the town's favorite gathering place for expats – a local business executive told me that Ge was the best mayor in China.
The mayor has to be doing something right.
The city has a third of the population of neighboring Chongqing. It's located in a basin, and a perpetual bank of clouds seems to hang over it. The city itself is flat, and full of gray, dull buildings.
But there's something about the place.
It's got the fifth largest airport in China, and ranks third in the number of cars people drive, according to Zen Chen, general manager of the local European Union Chamber of Commerce. It's a major draw for high-tech firms, for foreigners, and even for foreign restaurants. About 11 percent of the city's GDP comes from tourism. Over 25 million tourists came to the city during the first half of the year, a 15 percent increase over last year, according to the latest government data. The number of foreign tourists went up 41 percent, to almost half a million, for the first nine months of the year.
The city consistently ranks in the top ten for livability and business climate.
It welcomes outsiders like few other cities in the region, said Zen.
For example, Chengdu has twice the number of Starbucks as Chongqing.
According to Ge, 120 of the Global Fortune 500 have offices or branches in Chengdu – including 14 foreign banks.
From what I heard, the city is focusing firmly on the basics – and not the unnecessary frills. On education, for example. On building a new subway system. On making it easier to commercialize farming. On helping out the rural underclass. On protecting the environment.
I heard from locals that, in years past, the air was so full of pollution that the sun could never get through. Today, I'm told that a nice bright sun will sometimes burn away the clouds and you can see blue skies.
I saw the Panda Research Center – a world-class facility. The pandas had beautiful habitats, very much in keeping to what you would see in the best zoos in the West.
But I was constantly surprised by how little hype and selling was involved. Sure, there was a tiny little alcove where you could buy a stuffed panda, but with 500,000 visitors a year to this facility alone (60% foreign), I would have expected to have been besieged on all sides by people looking for a piece of my wallet.
If this center had been anywhere else, it would have been difficult to walk out without panda T-shirts, panda books, panda jig saw puzzles, panda DVDs. And where was the panda-themed restaurant and amusement park?
Here, as everywhere else, Chengdu seems understated to the point of humility.
There were no sequins on the clothes in downtown storefronts that I could see – the whole city seems to be classically stylish.
Even the high-end malls in the city center, showing off the latest European fashions, avoid the garish.
The city is also far more intellectual than I expected. The drinkers I met debated Chinese history. The population of expats is small but warm and welcoming. There is a definite vibe of a college town.
Everybody I met here loves Chengdu.
According to the mayor, there's a saying that once people visit Chengdu, they don't want to leave.
I'm flying back out to Shanghai on Saturday, and I have to admit that Chengdu is a difficult city to leave.
Can companies get subsidies? Low-interest loans? Tax breaks?
His answer surprised me. I expected a few vague promises, maybe some obfuscations, some exaggerations.
I got none of that.
"Frankly, Chengdu can't offer the same kinds of incentives as some other cities are offering," he told a room full of visiting foreign journalists.
Yang is a technocrat. He started out his career as an engineer, and seems not to have learned the art of hype and public relations. Instead, he tells it like it is.
At the Bookworm the next night – the town's favorite gathering place for expats – a local business executive told me that Ge was the best mayor in China.
The mayor has to be doing something right.
The city has a third of the population of neighboring Chongqing. It's located in a basin, and a perpetual bank of clouds seems to hang over it. The city itself is flat, and full of gray, dull buildings.
But there's something about the place.
It's got the fifth largest airport in China, and ranks third in the number of cars people drive, according to Zen Chen, general manager of the local European Union Chamber of Commerce. It's a major draw for high-tech firms, for foreigners, and even for foreign restaurants. About 11 percent of the city's GDP comes from tourism. Over 25 million tourists came to the city during the first half of the year, a 15 percent increase over last year, according to the latest government data. The number of foreign tourists went up 41 percent, to almost half a million, for the first nine months of the year.
The city consistently ranks in the top ten for livability and business climate.
It welcomes outsiders like few other cities in the region, said Zen.
For example, Chengdu has twice the number of Starbucks as Chongqing.
According to Ge, 120 of the Global Fortune 500 have offices or branches in Chengdu – including 14 foreign banks.
From what I heard, the city is focusing firmly on the basics – and not the unnecessary frills. On education, for example. On building a new subway system. On making it easier to commercialize farming. On helping out the rural underclass. On protecting the environment.
I heard from locals that, in years past, the air was so full of pollution that the sun could never get through. Today, I'm told that a nice bright sun will sometimes burn away the clouds and you can see blue skies.
I saw the Panda Research Center – a world-class facility. The pandas had beautiful habitats, very much in keeping to what you would see in the best zoos in the West.
But I was constantly surprised by how little hype and selling was involved. Sure, there was a tiny little alcove where you could buy a stuffed panda, but with 500,000 visitors a year to this facility alone (60% foreign), I would have expected to have been besieged on all sides by people looking for a piece of my wallet.
If this center had been anywhere else, it would have been difficult to walk out without panda T-shirts, panda books, panda jig saw puzzles, panda DVDs. And where was the panda-themed restaurant and amusement park?
Here, as everywhere else, Chengdu seems understated to the point of humility.
There were no sequins on the clothes in downtown storefronts that I could see – the whole city seems to be classically stylish.
Even the high-end malls in the city center, showing off the latest European fashions, avoid the garish.
The city is also far more intellectual than I expected. The drinkers I met debated Chinese history. The population of expats is small but warm and welcoming. There is a definite vibe of a college town.
Everybody I met here loves Chengdu.
According to the mayor, there's a saying that once people visit Chengdu, they don't want to leave.
I'm flying back out to Shanghai on Saturday, and I have to admit that Chengdu is a difficult city to leave.
Thursday, November 1, 2007
Fair Taxes For All
At a dinner over hairy crabs a few days ago, I was discussing Chinese taxes with a group of visiting Italian logistics managers. A Chinese manager at the meeting complained about high taxes and fees but after the Italians heard what the tax rates actually were, the conversation took a different tack entirely.
Sure, an increase from 15 percent to 25 percent is big jump high. But compared to the tax rates in other countries – especially Europe – the 25 percent starts seeming like a pretty low number.
And, as Sherisse Pham explains in this week's article about Aoxing Pharmaceutical, some foreign companies are able to lock in the previous 15 percent rate for a little while longer.
For Chinese companies, the tax rates are falling – from 33 percent to 25 percent - thus leveling the playing field for domestic and foreign firms.
I have friends who are Russian businessmen who came to China because the tax situation is so friendly. It is possible to do business legally in China, paying all taxes and fees, and still make a decent profit. In Russia, by comparison, taxes can sometimes add up to more than 100 percent of income.
Sure, some people do avoid paying their taxes. Eventually, the "fapiao" system of tax receipts needs to be replaced with the standard international system, where any invoice or receipt or cancelled check can be used as documentation of a business expense – and all revenues are taxable, whether a company issues a fapiao for them or not.
However, even with its problems, China's tax structure – and collections – are improving dramatically.
Earlier this month, China's State Administration of Taxation reported that tax revenues went up 30.8 percent -- to 3.72 trillion yuan (US$495.5 billion) -- in the first three quarters of this year. That's the highest growth rate for the same period since 1994, according to Xinhua.
It's also about three times higher than the rate at which the economy as a whole grew.
Corporate income tax revenues rose even more, by 35.8 percent.
Clearly, somebody out there is paying more taxes than they paid last year.
Equalizing taxes between foreigners and locals can only encourage that process, as a basic unfairness in the system is eliminated.
And much of the taxes that are collected do go for pretty decent purposes – infrastructure, education, health care. This creates a virtuous cycle – better infrastructure and education helps business, which in turn further expands the tax base.
Now that the government has lowered the tax rate, it should make it easier to track receipts. Today, taxi cabs and Starbucks restaurants already issue receipts which are official tax documents, so it is possible to integrate tax collections into general operations. But the supermarket chain downstairs forces customers to go to the customer service window to get a tax receipt. It's very doubtful that more than a small percentage of customers will ever bother doing that.
Sure, an increase from 15 percent to 25 percent is big jump high. But compared to the tax rates in other countries – especially Europe – the 25 percent starts seeming like a pretty low number.
And, as Sherisse Pham explains in this week's article about Aoxing Pharmaceutical, some foreign companies are able to lock in the previous 15 percent rate for a little while longer.
For Chinese companies, the tax rates are falling – from 33 percent to 25 percent - thus leveling the playing field for domestic and foreign firms.
I have friends who are Russian businessmen who came to China because the tax situation is so friendly. It is possible to do business legally in China, paying all taxes and fees, and still make a decent profit. In Russia, by comparison, taxes can sometimes add up to more than 100 percent of income.
Sure, some people do avoid paying their taxes. Eventually, the "fapiao" system of tax receipts needs to be replaced with the standard international system, where any invoice or receipt or cancelled check can be used as documentation of a business expense – and all revenues are taxable, whether a company issues a fapiao for them or not.
However, even with its problems, China's tax structure – and collections – are improving dramatically.
Earlier this month, China's State Administration of Taxation reported that tax revenues went up 30.8 percent -- to 3.72 trillion yuan (US$495.5 billion) -- in the first three quarters of this year. That's the highest growth rate for the same period since 1994, according to Xinhua.
It's also about three times higher than the rate at which the economy as a whole grew.
Corporate income tax revenues rose even more, by 35.8 percent.
Clearly, somebody out there is paying more taxes than they paid last year.
Equalizing taxes between foreigners and locals can only encourage that process, as a basic unfairness in the system is eliminated.
And much of the taxes that are collected do go for pretty decent purposes – infrastructure, education, health care. This creates a virtuous cycle – better infrastructure and education helps business, which in turn further expands the tax base.
Now that the government has lowered the tax rate, it should make it easier to track receipts. Today, taxi cabs and Starbucks restaurants already issue receipts which are official tax documents, so it is possible to integrate tax collections into general operations. But the supermarket chain downstairs forces customers to go to the customer service window to get a tax receipt. It's very doubtful that more than a small percentage of customers will ever bother doing that.
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