Today we had the pleasure of inducting my good friend Mike Snow into our Rotary club. Mike is a local entrepreneur and business owner in the electrical-supply distribution industry. Mike has history of community involvement and will be a great asset for our club. Welcome Mike!
Since our scheduled speaker did not arrive, Jim Bickel presented to us this morning. Jim and his company are involved in the financial machinations of helping open Chinese companies to US markets. Jim gave us an update on his recent trips to China and, in general, his assessment of China’s growing economic power and current events with regard to tariffs. Concerning the recent trade war, Jim believes that China has more to lose as they are more dependent on trade with the US than we are with them. However, he does not see this situation as being stable. He believes China will become less dependent on trade with the US in the future as economic globalization continues its impervious ascent, particularly as India becomes an emergent economic powerhouse. As stated in a recent Wall Street Journal article, the gamble of the US Administration is that the tariffs will result in barrier free trade. As stated by Jim, he believes the goal of the current trade war is to put the United States in a more competitive trade position as these global centers of economic power emerge and become more dominant in the years ahead.
Jim stated he personally witnessed a situation where a Chinese company stole a device, reverse engineered it, and sold it back to the United States at a reduced price. He also stated that some Chinese acknowledge they engage an unfair trade practices. Since Chinese media and information dissemination is controlled by the government, news about tariffs and any harmful effects on the economy is suppressed thereby keeping markets calm. This contrasts to the situation in the United States where such information is available instantly.
Ever since China adopted elements of free market capitalism in the late 1970s, hundreds of millions of Chinese have come out of poverty. During that time period, poverty has dropped from about 60% to under 5%. Jim stated that there are more people in the middle class in China than there are people in the United States! While this is great news, the Chinese government still controls the degree with which markets remain free by intervening with government regulation. They call this “capitalism the communist way”. The Chinese government views this as necessary in order to retain political stability in the country.
In other areas, China no longer enforces the “one child per family” law. The increased family size has resulted in a flourishing population of young adults who want to engage in entrepreneurial activity and hire someone to take care of their parents instead of doing it themselves as they did in the past.
Jim stated that the weather in China can be hot and humid. Beijing, in particular, has pollution problems since it is situated in a basin surrounded on three sides by mountains, just as Los Angeles. Thus, the city acts as “pollution trap”. However, the situation recently has improved as the Chinese have been rapidly converting from dirty coal power to less polluting liquid natural gas (LNG). They are also engaged in building more nuclear energy plants.