chinese american economics II

during this year's China trip, Jingping and I had a few discussions re the issue of $-元 exchange rate, and I noticed a few more points.

so, the Chinese state controls the international value of the RMB, for reasons including the cycle explained in that previous post. i didn't state there that there's a special factor making that cycle necessary, factor being that exchanges are only possible through government-controlled agencies (i.e. Chinese banks, which are all state-run). the Chinese state is slowly allowing the value of the RMB to appreciate, by a few percent a year over the past few years, because they recognize that the power of the Chinese economy has outstripped the exchange rate.

in other words, Chinese labor and land - i.e. export - is no longer as cheap and plentiful for foreigners as it used to be, and foreign labor and land - i.e. import - is no longer obviously prohibitively expensive. the Chinese don't want to damage their export system, and they don't want to get overwhelmed with a whole new system of imports, so they're making the RMB adjustment very, very slowly.

this isn't what I noticed, though. this trip, the topic of American investment kept coming up, especially in the context of wealthy Chinese sending their high school or college age children to study in the US. this must be barely affordable even for the upper-middle-class Chinese that are doing it, because private schools in the US are expensive even for Americans. the skewed exchange rate makes it even more expensive, probably by a factor of 2 or more.

on top of this, Jingping's parents gave us a good amount of money to use for her optometry school bills; this is money that they otherwise would have lent to people in China for a small return. they recognized that Jingping taking a large US loan ("financial aid") and paying a large amount of interest would be more costly than giving her the money and thereby giving up their Chinese interest. but, it's still a loss this way, because simply by moving the cash to the US and waiting any meaningful interval of time, the value of the money will decrease.

you can think about this more generally, and in bigger numbers. moderately wealthy Chinese, i.e. those just above Jingping's parents, have enough to invest in their child's education, accepting the exchange rate loss because, well, it's their child. but for the very wealthy - which in China often means state officials, investment abroad means business interests. wealthy Chinese own property abroad, have money in foreign accounts which they use to do international business. they do this because of the operational freedom it gives them, and because their profit margins must be larger than the decline in value of the foreign currencies (i.e. $$) they're using.

but if the drop were too fast... the foreign calculations wouldn't change, and business might actually pick up a bit if it had any connection to markets that were now becoming available to Chinese spending. but for the wealthy Chinese controlling those businesses, their domestic profits could drop precipitously. they might even lose money in the short term.

so, it's not just about protection of the Chinese export economy, or protection against foreign export economies; it's also about protection of domestic profits from profits on foreign investments.

Quote of the week, from a new PNAS paper (sorry for the Harvard link, but it's not like anyone actually will be clicking on that!) on using genetic manipulations to get silkworms to produce spider-like silk:

"Silkworms can be cultivated en masse, but territorialism and cannibalism preclude spider farming as a viable manufacturing approach."

Priority Ranking

In another advance in procrastination, I have invented a method of ranking priorities of multiple projects. My primary reason for procrastination is still obscure, and we can just refer to it now by the shorthand term 'laziness'. However, I will maintain that important components of my procrastination include conflict between different projects, difficulty in efficiently organizing time, and inability to perceive in a useful or concrete way the relative priority of multiple alternative actions.

To address these three components, I decided simply to make a list of things which I have to work on, ranging from the immediate and obvious to the more wishful and distant. The list doesn't need to be deeply detailed, only superficially sketched, and it seems necessary that the different items should be mostly independent of one another. Having created this list, I then create a matrix of pairwise comparisons of priority of items in the list. The current list has twelve items, and so there are sixty-six comparisons to be made (twelve times twelve possible comparisons, minus the twelve identity comparisons, and then divided by two since order of comparison is assumed to be unimportant).

Each comparison is a rating on a three point scale. For each comparison, the following question is asked: "Given these two items (column, row), which is more important to work on right now?" If the first item has higher priority, the rating is 1.0; if the second item (i.e. not the first item), the rating is 0.0; if priority appears equivalent, the rating is 0.5. Below I've pasted in the current matrix. Only the values below the main diagonal are filled in; the main diagonal is null since these are meaningless comparisons, and the values above the main diagonal are automatically filled in as the inverse of the corresponding comparison below. Total priority for an item is simply the average over all rows for each column, and is shown in the leftmost column.


I think this system has potential! We'll see if it helps, and if I can keep up with it, updating it regularly. I haven't made up a scheme for what to do with projects that pass some sort of milestone; if a paper is finished (does that happen?), the item would probably just be removed from the list, while projects would transition to papers. There, I just made up a scheme!

Here's to organization!

design change

Look at the new design! I'm so excited. I'm going to post every day now, really.

We also have a new url, xuexixiangshang. This is the only configuration of 好好学习，天天向上 that worked as a valid prefix for blogger.com. It's a great slogan, and not quite as embarrassing as everyoneisdead, which belies that I didn't really expect this journal to last so long. Downside of changing the url is that my MS-WBT traffic is going to halt, though I guess eventually it will probably pick up again. Whatever!