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By RodgerRafter
June 4, 2009

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

In the last week, I've seen a wide variety of places, ranging from remote, to rural, to backward urban, to Chengdu (which appears to be more advanced than any city I've visited in the US).

I have seen no real signs of poverty anywhere in this. Even in the rural and remote areas, living standards seem reasonable. Farming families lay down large gardens wherever they'll fit along roads, hillsides, and especially in valleys. They have cell phones (with amazingly good coverage) and are well dressed. They tend to watch a lot of TV, play mah-jong and hang out with their friends and neighbors.

Farm life in China doesn't seem especially difficult. The government is subsidizing equipment purchases by 30% for farmers and finding other ways to encourage people to stay out in the country. I don't see any real problem with the migrant workers returning from the big cities to farm the land. The opportunity to earn a higher income in the cities will come and go, but the security of life on the farm will remain.

There's still a great deal of residential construction going on in the form of high-rise apartments in both the cities and the country. These are probably a good deal more efficient than most of the two story farm houses I've seen, but I have to wonder where all the people are going to come from to fill them. I expect a large housing glut to develop unless farmers become commuters to their fields. It may be that the newer buildings attract people out of older and less desirable housing and thus improve the overall quality of life of the people.

Even so, I expect the banks to take a big hit as a result of over-construction, but have learned that it would be no problem for the government to recapitalize the banks as they already did during the last global economic slowdown early this decade. Chinese banks probably do not make good investments now, but I have a great deal of confidence in most of the rest of the Chinese economy.

I've talked to many interesting people in my travels, and I'm still trying to put together all the pieces of their stories to get a more complete understanding of the Chinese economy. One young man described an area in GuangDong province that used to house 300,000 migrant laborers, but now has become a ghost town. He also talked about his friend from college who had been in the business of helping companies move their factories from China to Vietnam in search of cheaper labor. My response was that this didn't seem like a good idea because Chinese workers were so much better trained and the infrastructure was so much better. His response was that this was indeed the case and that now many of those same companies were hiring his firm to help them move back to China.

I've met two young engineers in my travels, and was surprised to learn that neither was exactly working as an engineer. One was in tech-support and the other was in sales, both for high tech companies. China produces so many engineers, that a majority end up over-trained for their jobs by western standards. A western company wouldn't pay big engineering salaries for a sales rep, or someone to man the phone support lines, but the Chinese companies can provide much more informed service as a result of cheap, highly skilled labor.

Here in Chendu traffic can be kind of bad. I haven't seen any gridlock, but it's a very big town (over 10 million people) and frequently stopping at traffic lights means a trip through town takes a long time. (I'll see rush hour for the first time when we ride the bus to the airport tomorrow morning, so my opinion could change some.) The streets are wide and very well maintained, and there are many innovative overpasses and undercrossings to help a large number of cars flow through intersections quickly.

In many areas around the country the capacity of the roads far exceeds the number of cars. China has been building up its infrastructure and keeping it in fantastic condition. I've seen exactly one pothole in the week and half I've been here. The airports have been nice and I'll be taking a train ride from Xi'an to Beijing later in the week and getting a better look at that side of the transportation picture.

We had one of our dragonboat races in an out-of-the-way city of 660,000 that I found to be backward compared to the tier 1 and 2 cities. A certain degree of cronyism in government and corruption the police department were evident in my dealings with local officials on matters relating to the race. Culturally, that is the one big burden I see holding back parts of China, but that can be overcome in time.

I think that the modern cities that are much more connected to the Western world operate in a much more open, honest and efficient manner. The educated people I've met in these places have been very open and thoughtful in our discussions about China's current condition. On the other hand, people in the town where that dragonboat race was held, had a much less developed world view. Still, it was fun to be treated like rock stars in a place where most people had never seen foreigners up close. We'd get stares everywhere we went in town, and frequent requests for photos. Simply smiling at someone and saying "hello" would make many people amazingly happy.

China still has much room for growth, when it comes to improving the standard of living for its people. There is plenty of labor available, even with the retirement age at 60 for men and 55 for women. With exports likely to remain weak for an extended period of time, I expect the focus to remain on increasing domestic consumption in order to promote political stability and economic growth through full employment.