China Tells

Universal Expo, World Fair or the Great Exhibition, whatever name you call it, seems losing its attractiveness to the world audience. However such a pessimistic fate might be turned around thanks to China government. The Shanghai Expo that officially launches in May is likely to be the most eye catching and spectacular Expo in the last one hundred years, promoting people’s interest towards Expo again.

During this week Shanghai expo had a pre-launch but it seems a painful experience to visit the expo, mainly due to the excessive crowds. To visit any hall, be it African, European or Asian, tourists need to queue for at least two hours, and some of the most popular halls are enforced to be closed as they can’t handle so many visitors. Trying to find some food in the expo is next to mission impossible, and one will be charged a hefty premium for a sandwich if he is lucky enough to undergo the long queue after a two hours wait.

It looks like not a very pleasant journey for any visitors to the Expo, given the estimate that there will be 500,000 visitors to Expo every day after the official launch in May (during the pre-launch the daily volume is estimated to be around 200,000). However there can’t be better opportunities for the organizers and restaurants at the Expo. Much luckier than their western peers, all they have to worry is not enough food for supply. CHINATELLS reckons that not many governments have the capability as Chinese government to organize an event on such a grant scale, mobilize such resource and successfully market it to such a world audience. CHINATELLS heard that most airlines have increased their ticket price to Shanghai by 30% to 50% in May with a label of ‘Expo’ on it.

If we think a little deeper, Expo is a good example reflecting the typical Chinese government led model of business development. While the western governments and central banks are struggling to pump liquidity into the real economy during 08/09 even if they slash the benchmark rate to almost zero, China did it in an electric speed successfully increasing the bank loan ten folds that of Western peers. To a large extent, Chinese government has acted as the visible hand and achieved what takes a free market mechanism months or even years to complete.

Whether such a Chinese model makes economic sense has attracted heated debates. The critics argue that governments can never beat the market in the efficiency of resource allocation. To build an extravagant road that nobody rides on will eventually lead to capital waste and hamper the growth (Read Article from Foreign Affairs Here). The promoters, on the other hand, hold that it is exactly the determination of the government that the current so called free market lacks, which delays the recovery of the recessionary economy in most developed markets.

CHINATELLS is of the opinion that no matter how right the theory looks on the economics books, the reality proves that such model has worked in the last 30 years. One can hardly attribute the growth of three decades merely to luck. On the other hand, whether such policy will continue to work in the next 30 years is a totally different question. Such an argument sounds very hindsight oriented. However, it is exactly such complexity of the reality that makes decision making difficult.

For China’s policy makers, one thing seems clear: if China follows the path of Western powers to climb the ladder of wealth and power, China is never going to make it in the next 50 or even 100 years within the existing rule of game. However it is not clear to CHINATELLS whether Chinese would have that patience.

Back to reality, it seems that China government is well aware of the current economic environment and takes action proactively. During the last week, the central government has released a few regulations to cool down the speculative mania in the property market, which caused some volatile movement on the equity market. CHINATELLS doubts such measure would cause any meaningful collapse in the housing market, but such measure should be healthy to the medium economy outlook in preventing the economy from becoming overheated.