Thursday, April 9, 2009

It’s the Time to Care About Our People’s Health.

by Julia Zhu

Millions of uninsured, inadequate medical resources, unequal access to care, expensive and unaffordable health care — China knows all about it.

Health infrastructure in the poor countryside is especially creaky. In 2005, 25% of public-health resources were devoted to rural residents, even though they made up roughly 60% of the population, the Wall Street Journal notes.

Most Chinese normally need to spend over 100 RMB out of their own pockets (about 14 USD) on the treatment for cold in hospitals in China. You may want to pause for a second before you say it is not that bad. For many rural Chinese, that amount of money may be 1/5 of their whole month income. I hear many people say “I am just too poor to get sick.”

China’s official Xinhua news agency framed the problems in pretty stark terms:

    The health care sector is one of the weak links in China’s social welfare system. Soaring medical fees, a lack of access to affordable medical services, poor doctor-patient relations and low medical insurance coverage compelled the government to launch the new round of reforms.

China announced plans Wednesday to build thousands of new hospitals and put a clinic in every village in the next three years, the first steps in a decade-long reform plan to provide universal health care coverage.

"By 2011, we will remarkably improve the accessibility of basic medical care and health care services and alleviate the burden of the general public for medical costs," Vice Health Minister Zhang Mao said at a briefing for reporters.

The reforms also include plans to build 29,000 new township hospitals, and 2,000 at the county level.

We're worried China will be the first country that will become old and sick before it becomes rich.

Health reform, a good move!

Monday, April 6, 2009

A Few Thoughts on Currency

by Edythe Huang

Lately, I’ve been a bit obsessed over a comment that Geitner made about China’s currency manipulation. Yes, I know it’s old news, and yes, I know that I’ve already blogged about it. But, I can’t seem to get past the accusation.

During a recent trip to China I got in the habit of asking people I met there what they thought of Chinese currency. I was starting to get a better picture of the big picture. Essentially I came to the conclusion that everyone manipulates their currency by indirectly buying and selling in the market, China is just an easy target because they do it a bit more than everyone else. I was just beginning to understand a small part of the very large and complex market that is Chinese currency. . . and then, China called for alternative currency. When I first watched the announcement on CCTV, I was a bit shocked.

Why in the world would China call for an alternative currency? After all, they are the largest holder of United States hard currency. Their incredible power created through holding so much hard currency reserve would essentially vanish . . . unless they used their hard currency reserve to buy the alternative currency. Their current account balance is much higher than any other country (by $100 trillion) and they aren’t burdened with the level of debt which saddle most western countries. It completely makes sense why China would want an alternative currency: they would have more of it than anyone else.

As for me, I was even more shocked in the hour when Geitner was agreeing with China. Thank goodness he changed his mind fast. Why would the United States want the rest of the world to lose confidence in the dollar? I do not know much about the intricacies of currency exchange and rates, but I do know that the only thing the dollar rests on is the confidence that the world places in the currency. Why would our finance guy say that we want a competitor? I have the upmost respect for Geitner’s intelligence and ability, but that short-term agreement with China did make me step back and wonder about his judgment for a moment.

Thursday, April 2, 2009

China Wants to Divorce the Dollar

by Julia Zhu

Just over one week before President Barack Obama and other world leaders met in London for a summit focusing on the global recession, China was making clear it wants a greater say in managing economic policies worldwide. The latest blast from Beijing: a call by China's top central banker, Zhou Xiaochuan, to dump the U.S. dollar as the world's most important currency.

Zhou: reserve currencies based on a single issuing country just doesn’t work:

    Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries’ demand for reserve currencies. On the one hand–the monetary authorities can not simply focus on domestic goals without carrying out their international responsibilities. On the other hand–they cannot pursue different domestic and international objectives at the same time. They may either fail to adequately meet the demand of a growing global economy for liquidity as they tries to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand.

The goal, Zhou writes in a paper released on the website of People’s Bank of China on Mar. 23, is to "create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run."

Zhou suggested the IMF's Special Drawing Rights, or SDR, could serve as a super-sovereign reserve currency.

The idea of an international currency is worth considering. We do have a global economy. To facilitate trade, we need an international currency. I mean, how can we have a global economy unless we also have a global currency?

However, pretty much everyone agrees replacement of U.S. dollars with an international currency is not going to happen any soon. Here’s why:

First, the U.S. isn’t welcoming the idea and will fight against it. Speaking on Mar. 24 at a congressional hearing in Washington, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke both said they categorically oppose the change. Obama came out with support of the US Dollar and to reply to the Chinese he stated, “I don’t believe there is the need for a global currency.”

Second, the U.S. dollar is already established as a medium of exchange. To replace US dollars, the new currency would have to be adopted worldwide by private companies for international trade transactions, a tremendous challenge.

No matter what, Chinese are now nervous holding U.S. dollars. Taxi drivers in big cities such as Beijing and Guangzhou don’t take U.S. dollars as they did before. I think many of us are nervous holding dollars and maybe rightfully so. Maybe we should learn from Jim Rogers, who walk around with gold coins in his pocket (see Jim Rogers video with Bernard Lo) in case the whole financial system collapses.