March 28, 2024

Hauling New Treasure Along the Silk Road

Dispatchers in the Kazakh border town of Dostyk gave this train priority over all other traffic, including passenger trains. Specially trained guards rode on board. Later in the trip, as the train traveled across desolate Eurasian steppes, guards toting AK-47 military assault rifles boarded the locomotive to keep watch for bandits who might try to drive alongside and rob the train. Sometimes, the guards would even sit on top of the steel shipping containers.

The train roughly follows the fabled Silk Road, the ancient route linking China and Europe that was used to transport spices, gems and, of course, silks before falling into disuse six centuries ago. Now the overland route is being resurrected for a new precious cargo: several million laptop computers and accessories made each year in China and bound for customers in European cities like London, Paris, Berlin and Rome.

Hewlett-Packard, the Silicon Valley electronics company, has pioneered the revival of a route famous in the West since the Roman Empire. For the last two years, the company has shipped laptops and accessories to stores in Europe with increasing frequency aboard express trains that cross Central Asia at a clip of 50 miles an hour. Initially an experiment run in summer months, H.P. is now dispatching trains on the nearly 7,000-mile route at least once a week, and up to three times a week when demand warrants. H.P. plans to ship by rail throughout the coming winter, having taken elaborate measures to protect the cargo from temperatures that can drop to 40 degrees below zero.

Though the route still accounts for just a small fraction of manufacturers’ overall shipments from China to Europe, other companies are starting to follow H.P.’s example. Chinese authorities announced on Wednesday the first of six long freight trains this year from Zhengzhou, a manufacturing center in central China, to Hamburg, Germany, following much the same route across western China, Kazakhstan, Russia, Belarus and Poland as the H.P. trains. The authorities said they planned 50 trains on the route next year, hauling $1 billion worth of goods; the first train this month is carrying $1.5 million worth of tires, shoes and clothes, while the trains are to bring back German electronics, construction machinery, vehicles, auto parts and medical equipment.

DHL announced on June 20 that it had begun weekly express freight train service from Chengdu in western China across Kazakhstan and ultimately to Poland. Some of H.P.’s rivals in the electronics industry are in various stages of starting to use the route for exports from China, freight executives said.

The Silk Road was never a single route, but a web of paths taken by caravans of camels and horses that began around 120 B.C., when Xi’an in west-central China — best known for its terra cotta warriors — was China’s capital. The caravans started across the deserts of western China, traveled through the mountain ranges along China’s western borders with what are now Kazakhstan and Kyrgyzstan and then journeyed across the sparsely populated steppes of Central Asia to the Caspian Sea and beyond.

These routes flourished through the Dark Ages and the early medieval period in Europe. But as maritime navigation expanded in the 1300s and 1400s, and as China’s political center shifted east to Beijing, China’s economic activity also moved toward the coast.

Today, the economic geography is changing again. Labor costs in China’s eastern cities have surged in the last decade, so manufacturers are trying to reduce costs by moving production west to the nation’s interior. Trucking products from the new inland factories to coastal ports is costly and slow. High oil prices have made airfreight exorbitantly expensive and prompted the world’s container shipping lines to reduce sharply the speed of their vessels.

Slow steaming cuts oil consumption, but the resulting delays have infuriated shippers of high-value electronics goods like H.P’s. Such delays drive up their costs and make it harder to respond quickly to changes in consumer demand in distant markets.

Article source: http://www.nytimes.com/2013/07/21/business/global/hauling-new-treasure-along-the-silk-road.html?partner=rss&emc=rss

Chinese Way of Doing Business: In Cash We Trust

“He drove here with two friends in a beat-up Honda,” Mr. Lin recalled. “One of his friends carried about $60,000 in a big white bag, and the buyer had the rest in a heavy black backpack.”

Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency.

This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.

For all China’s modern trappings — the new superhighways, high-speed rail networks and soaring skyscrapers — analysts say this country still prefers to pay for things the old-fashioned way, with ledgers, bill-counting machines and cold, hard cash.

Many experts say it is not a refusal to enter the 21st century as much as wariness, of the government toward its citizens and vice versa.

Doing business in China takes a lot of cash because Chinese authorities refuse to print any bill larger than the 100-renminbi note. That’s equivalent to $16. Since 1988, the 100-renminbi note, graced by Mao Zedong’s visage, has been the largest note in circulation, even though the economy has grown fiftyfold. (The country’s national icon, Chairman Mao, appears on nearly every note: the 1-, 5-, 10-, 20, 50- and 100- renminbi note.)

Chinese economists and government officials often suggest that printing larger denomination notes might fuel inflation. But there is another reason.

“I’m convinced the government doesn’t want a larger bill because of corruption,” said Nicholas R. Lardy, a leading authority on the Chinese economy at the Peterson Institute for International Economics in Washington, noting that it would help facilitate corrupt payments to officials. “Instead of trunks filled with cash bribes you’d have people using envelopes. And there’d be more cash leaving the country.”

All the buying, bribing and hoarding forces China to print a lot of paper money. China, which a millennium ago was the first government to print paper money, accounts for about 40 percent of all global paper currency output, according to a report published by the China Banknote Printing and Minting Corporation. Adjusting for the size of its economy, China has about five times as much cash in circulation as the United States.

In the United States, the highest denomination printed is $100; in Japan, it is the 10,000-yen note, worth about $100; the 500 is the highest-denomination euro note, worth about $650. No major economy has limited itself to such a low denominated bill as China.

By making the 100-renminbi note the largest bill, the nation’s citizens need more of it to buy a television or Swiss watch, never mind a car, home or a yacht, which China’s state-run media said was bought a few years ago by men bearing two suitcases filled with cash.

Following those paper bills as they course through this booming economy offers a fascinating glimpse into how China’s financial system works, and how parts of the country remain stuck in yesteryear.

“In large parts of China, it still looks like the U.S. in the 1950s: most everything is in cash,” said Jeffrey R. Williams, executive director of the Harvard Center Shanghai and a former bank executive who has worked in China for more than 30 years. “In the U.S., you might have one bill-counting machine at a bank, but here every teller has one.”

Although China’s coastal cities have flourished during the 30 years of economic prosperity, economists say the country’s interior remains poor and disconnected from the more modern aspects of the financial grid. As a result, the poor prefer to do business in cash.

Xu Yan contributed research in Shanghai.

Article source: http://www.nytimes.com/2013/05/01/business/global/chinese-way-of-doing-business-in-cash-we-trust.html?partner=rss&emc=rss

In Beijing, Lagarde Backs Bigger Say for China at I.M.F.

BEIJING — Finance Minister Christine Lagarde of France, the top candidate to run the International Monetary Fund, said Thursday that she backed a bigger say for China at the organization while making it clear that the euro zone crisis would be a priority if she wins the job.

Ms. Lagarde made the comments in Beijing, the latest leg of her world tour to seek support for her I.M.F. bid. She is considered the favorite to replace the former I.M.F. chief, Dominique Strauss-Kahn, after he was arrested last month on attempted rape charges.

Ms. Lagarde said her talks with Chinese central bank and Finance Ministry officials about her candidacy were positive, but she stopped short of claiming Beijing’s outright support.

“I’m very positive about my trip to China, but the decision does not belong to me. It belongs to the Chinese authorities,” she said at a news conference at the French Embassy in Beijing.

“I’m confident; I’m very positive about the meetings I’ve had so far. Some governments and some countries have decided to go public early. My sense is that it’s too early to count your chickens, if I may say.”

China has not said whether it supports Ms. Lagarde, but it has joined other big emerging economies in demanding that the I.M.F. and other international financial institutions give greater heed to their demands.

And in Beijing, Ms. Lagarde indicated that she was listening to those demands. She said she backed the decision last fall to increase China’s voting rights at the I.M.F. from 3.65 percent to 6.4 percent, and also said the organization would help Beijing internationalize the renminbi.

An article published on Thursday in a Chinese central bank newspaper said Ms. Lagarde would be good for the I.M.F.’s top job because she is experienced in handling the euro sovereign debt crisis and could offer a fresh image to the agency as a woman.

The front-page story, citing a government researcher, does not necessarily reflect Beijing’s official position. But the prominent position given to the article suggests at least indirect support from the central bank.

After her talks with the Chinese vice premier, Wang Qishan, and the central bank chief, Zhou Xiaochuan, on Wednesday, Ms. Lagarde said that reforms at the I.M.F. should continue to benefit emerging economies.

“The second thing that we also agreed on was that the trends of reforms that has taken place must be continued and must be developed, both in relation to the governance of the fund, in relation to the appropriate representativeness of its members, particularly with those countries that are underrepresented, as is the case with China,” she said.

But Ms. Lagarde also made clear that her priority if she becomes managing director of the I.M.F. will be the euro zone crisis that continues to threaten Greece, Portugal and other European economies struggling to cut gaping fiscal deficits.

“Clearly, it is the immediate focus of the fund’s operations at the moment,” she said.

She urged Greece to emulate Portugal in seeking to form a broad political alliance to push through painful reforms.

Portugal’s prime minister in waiting, Pedro Passos Coelho, has begun formal coalition talks with the rightist CDS-PP party to seek a pact to form a majority government.

“One great strength of Portugal which I hope Greece will be able to emulate is that Portuguese political parties and authorities joined forces and formed an alliance. That was critical,” said Ms. Lagarde.

Ms. Lagarde will travel to Lisbon on Friday to attend the African Development Bank’s annual meeting.

The main obstacle in Ms. Lagarde’s bid is the possibility of a French inquiry into her role in a 2008 arbitration payout.

She also faces opposition from other emerging markets. Agustín Carstens, Mexico’s central bank chief, who is also competing for the I.M.F. post, is due to visit China next week.

Colombia became the first major Latin American nation to publicly endorse Mr. Carstens on Wednesday, calling on others to do the same.

The Colombian Foreign Ministry said in a statement a dozen other Latin American nations now backed Mr. Carstens. The Latin American group includes Venezuela, Bolivia, Peru, Panama, Uruguay, Mexico, Paraguay, Belize, Honduras, Guatemala, the Dominican Republic and Nicaragua, the statement said.

Costa Rica also endorsed Mr. Carstens on Wednesday.

“Colombia expresses support for the aspiration of Agustín Carstens and invites other governments of the Americas to join in backing this bid,” Foreign Minister Maria Angela Holguin said in the statement.

Finance Minister Pranab Mukherjee of India said on Tuesday that the country has not committed to support Ms. Lagarde’s bid despite her visit to the country, a sign that India may still be hopeful of nominating an alternative candidate.

Article source: http://www.nytimes.com/2011/06/10/business/global/10iht-fund10.html?partner=rss&emc=rss