Chinese New Year

This year, Chinese New Year will fall on 2/7/08 which is next Thursday. This holiday period is by far the most important holiday period on the Chinese calendar. There is really nothing comparable on the American calendar. It is something along the lines of a combination of Christmas, Thanksgiving and the 4th of July.

As China's economic engines have shifted to the large coastal cities in the east, numerous migrant workers live and work there. Chinese New Year period will mean that many of these migrant workers will be traveling back to their hometowns and villages. This period of time will see the severe usage of China's infrastructure. Train and bus stations are jammed packed with people weeks in advance trying to purchase tickets for that time period. This is exacerbated by the fact that these tickets are only available at the train stations and not over the internet. There are stories where trains are so packed with people that ones who must endure long train journeys have resorted to wearing adult diapers because there is no way for them to get past the crush of people to the toilets.

This is the only time of the year for these migrant workers to make it back home to see their family and friends. It is a time where gifts are expected from these returning workers. These workers represent the best of these far-flung villages, the ones who are capable enough to land jobs in the urban areas from the menial to the white-collared. It is a time where petty crime in the cities will rise leading up to the holidays from the migrant workers who did not do so well for the year but need to live up to their family's financial expectations when they return home.

On the positive side, this is a time where people reunite with their family and friends to catch up on each other's lives.

It is funny how many of the sentiments felt at this time of the year by the Chinese is so similar to the ones felt in the US during their most important holiday season.

Bubble

Anybody who has been reading the business sections of their favorite publication will undoubtedly know that the US economy has faltered and is in danger of falling into a recession. The reason is pretty basic; there has been a housing bubble which has led to an excess of liquidity in the economy. This excess liquidity has spurred consumption and investment which has overheated the economy. This impending recession is just a normal process where things return to where it should be. The stock market has reacted and I believe that things may turn painful for a year or two but it should be nothing that we cannot recover from.

The interesting part from my perspective is what will happen here in China. The Chinese investors have felt that their economy has been fairly insulated from the rest of the worlds’ ills. This has led to the unabated climb of their stock and property market. As these markets get hotter and hotter, less sophisticated investors (or should I say speculators) enter the market and raise the temperature further. This process has fed on itself for quite a few years now in China. It started in the property markets about 5 years ago and the stock markets 2 years ago. The prices of these assets have climbed to levels that cannot be justified by conventional measures. While bad news have come out of US banks and investment firms about the subprime losses, the Chinese stock markets have pretty much ignored it. Well, yesterday it has been reported that the Bank of China, the second largest bank in China and by some measures one of the largest in the world may have up to 2 billion in US subprime mortgage losses when they announce earnings. This could represent the first evidence that the Chinese economy is not so insulated from the world economy. I think this could be a big blow to the psychology of the market and lead to a re-evaluation by investors about just how safe their stock market really is. Just like the feeding frenzy that led to the bubble, the same mentality could lead to the panic that results in the crash of two very important markets in the Chinese economy.

The interesting factor in this scenario is the belief held by many investors in China that the Chinese government will somehow make sure that the stock and property markets will be performing well leading up to their coming out party that is this years Summer Olympics in Beijing. This kind of common belief could lead to the self fulfilling prophecy of a large withdrawal of investments out of these markets sometime around the Olympics. How this interplays with the possible global recession will be very interesting.

My interactions with the local Chinese tells me that many people are currently participating in this stock market bubble - mostly unsophisticated investors who think they know how to invest. It is basically the same kind of stories that I heard and saw during the days of the NASDAQ bubble back in the late 90s and early 00s. Its amazing to realize even with such differing cultures we are all the same. What this also tells me is that when this market crashes there will be lots of pain among the people and they really have nobody to blame but themselves.

Of course this is just speculation on my part, but having been through the NASDAQ bubble and the recent housing bubble in the US, I think it would be pretty safe to say that the similar outcome will take place here in China.

Street food

I think one of the things that really gives a city an identity is its cuisine. This is something that I always enjoy sampling where ever I go. It can tell you quite a bit about a city.

I think if you really want to know the heart and soul of a city you just need to sample its street food. This is where you get to see the composition of a city. Just like any urban centers anywhere in the world Shanghai has a variety of people residing here. It may not be as diverse than New York City but Shanghai has people from all over China and many parts of the world. You will find international food in proper restaurants but if you want to know about the kind of people who have come to Shanghai from other parts of China just check out their street food.

Here are some pictures of some of the street food that are available here in Shanghai:



Various meat and vegetables on wooden skewers being pan fried over a metal plate. Love that recycled oil!!





This one is a flat bread that is being "baked" in a home made oven. The oven appears to be a commercial metal drum that has been reincarnated.




Another home made oven used to make baked yams.

Build it and they will come.

The new year ushered in three brand new subway lines consisting of 59 new stations in Shanghai which took approximately 2 years to build. This kind of change sharply contrasts with New York where it takes years to build a few new stations along the E line about 10 years ago.

There are now 9 subway lines in Shanghai. We took one of the lines from end to end. This particular line extends into the suburbs of Shanghai. When we New Yorkers think suburbs, we think of places like Queens or Brooklyn. These are places where it is more residential but still developed. The areas that some of the subway lines here in Shanghai extends to are underdeveloped to even rural areas. This is indicative of how nascent the development of Shanghai is compared to other cities around the world. The downtown areas are as developed now as any big urban centers around the world, but the concept of suburbs is still taking root. With a population of over 15 million, there is a desperate need for a suburban area because the urban areas are so densely populated.

What is happening here reminds me of a PBS documentary that I viewed about the history of New York City. When the subways of New York extended to Brooklyn and Queens, people wonder "Why there? nobody lives there anyway - its all farm land." This is kind of what I saw out of the windows of the elevated number 9 line here in Shanghai. Of course, once the subway is in place commuting from those once isolated areas will become easier thus stimulating development.

The process is continuing at a feverish pace. There are more lines under construction currently and will continue to make transportation more efficient.

In closing, if one has the resources or patience it might not be a bad idea to invest in some property along some of these new subway lines; but that is another conversation.