The battle of the giants - the WTO-column

(later also at Chinabiz)
When I struggle through the media reports on the annual gathering of the National People Congress NPC) in Beijing I wonder what is more boring, this mostly public gathering in Beijing or the media reports themselves. With very few exceptions, journalists seem not to be able to identify what is really happening. Of course, much of the real deals are closed behind the scenes. Many background details of the intense debates might stay out of the limelight. But why not asking more questions?

I want to focus here on two major shifts of major importance for China’s economic development, and for foreign investors that are wrongly ignored by most media. In the past two years the government has shifted much of its attention from the cities to the countryside. That relative success has caused a drop in the number of migrant workers going to more industrialized parts of China causing a severe lack of cheap labor.

Obvious that policy is going to continue, when you hear the public statements by the premier, but you do not have to be a clairvoyant to see that this will make some powerful people in the Party very unhappy. The lack of labor has not caused the wages of workers to rise, but when the income of farmers keeps on going up, manufacturers will have a major problem in getting enough workers. It is still unclear whether this will affect China’s competitive advantages, but that question should be going as a mantra through the debates reporters are covering.

A second debate between giants involves the hefty investments in China’s telecom infrastructure. According to the Wall Street Journal the investments should amount to about 37 billion US dollar, but mostly the real investments in this kind of huge infrastructural projects tend to be at least double of what is estimated at the start. Only imagine the extra costs of hundreds of millions of mobile phones that might need replacement.

Internet might have changed the way we communicate (with now about ten percent of China’s inhabitants or 120 million people), but 3G might easily double that number and certainly the way we talk to each other. I’m not that eager to watch the Beijing Olympics on my new mobile phone, but there might be a few other things I do want to do.

While the introduction of the Chinese standard of 3G has become a political priority, you do not need to have a huge imagination to see some of the heated debates taking place at all these Beijing restaurants where powerbrokers with giant differences of interest meet.

China Mobile has already indicated, they would not accept the Chinese standard for 3G even when they would get it for free. Their success has been the European standard and replacing that with a fully new system might be an unattractive proposition. Huge media groups are now testing their IPTV-systems, a huge investment that might partly duplicate the 3G infrastructure. Killing those IPTV-experiments would cost a few careers.

Looking at those interests does mean you have to look beyond the purely ceremonial gatherings. But assuming that bringing together all those people with hugely different agendas could be boring, that would be a misrepresentation of the truth.

Fons Tuinstra