The amount of attention that’s gone towards Rmb revaluation in the last several days seems out of place, if only because gradual appreciation of the currency appears obvious and inevitable given that numerous agencies and bureaus are putting in place machinery to deal with its impacts, such as SAFE diversifying away from USD exposure as much as possible or Shanghai and Shenzhen stock exchanges moving towards international Rmb denominated listings, which will eventually require free(er) capital flows.

Rmb appreciation will not materially affect the U.S. trade deficit, and it will have questionable near-term impacts on imbalances. As Chinese gain more purchasing power, they will likely do things like leave the lights on after 5:00pm (and consume more coal and oil as a result), pushing up energy prices. Americans will then (broadly) be forced to pay more to drive their hummers and power their plasma televisions, increasing the United States’ total import bill. Furthermore, there will likely be some level of input-import substitution occurring within China itself, if mainland manufacturers find that they can suddenly purchase other components more cheaply. Threatening sanctions to hasten this process – for dubious gain – is nationalist stupidity at its most pure.

For what’s at stake among various interest groups within China, we turn to the eminent Professor Pettis:

A revaluation shifts wealth from the Chinese government and the manufacturing sectors (and some wealthy Chinese) to Chinese households — which, by the way, is pretty much what is meant by “rebalancing” in the Chinese context. There are many other ways besides revaluation to shift income this way. The PBoC can raise deposit rates, wages can rise faster than productivity, companies can be privatized by giving away shares to the pubic, and so on. They all have the same effect. They shift resources to households and away from producers, infrastructure investment, and real estate developers. This allows household income to grow relative to national income, which ultimately increases the consumption share of GDP.

Domestic Chinese exporters don’t have a leg to stand on for a weak Rmb peg, at present. That doesn’t mean they aren’t lobbying for it, though. To the extent they will be able to sell an us vs. them narrative, anti-China sanctions will only provide more ammunition to make the case for more domestic subsidies, be they explicit (tax breaks) or implicit (currency).

One aspect of China that I’ve had some difficulty adjusting to are the prevailing taboos around cell phone use. The most significant difference is that one must always answer their phone. This seems to be the result of having no voice mail (not sure why, since it doesn’t seem difficult to implement from a technical perspective.) I have, for example, seen mile long riot acts read to a friend [in text message form] after they fail to answer their local lady friend’s cell phone call while eating dinner with me [note - the proper, culturally sensitive response in this instance is: 'woman git in the kitchen and boil me some noodles']. The only time that someone is allowed not to answer their phone is if they ‘are in an important meeting with their boss’ (direct from earlier riot act).

The level of umbrage stemming from non-phone-call answering is approximately equivalent to what we gringos might feel if someone ignores our voice message for several days. Of course, gringos here are given more of a free pass to not pick up their cell phone. Personally I expect that someone will text if they have something important to say. Instead, they will just keep calling – seven, eight, nine times in a row – for a perfectly normal, unimportant message. This sort of tyrany is why people answer their cell phones in the movie theater, during a large dinner banquet, or while speeding through traffic on an electric motor-trike. Mass data analysis corroborates this phenomenon:

Typing in “girlfriend” reveals several interesting results, including, “what should I do if my girlfriend doesn’t answer her cell phone?” [answer: call again later; or better yet text her saying git in the kitchen and boil me some noodles]. A woman’s failure to answer the phone in this instance denies the simpering mainland lad the opportunity to profess his undying love for the fourth time that day; and obviously means that the girl in question 1) no longer loves the young Chinese man and won’t let him carry her handbag anymore or 2) she’s cheating on him at that very moment and 1 will logically follow.

So, when in China, always answer your phone.

Those of us who are vehemently pro-globalization often gloss over transitional effects from job losses: Pareto optimality isn’t much of a consolation if you’re the one losing the job. This NYT article provides an overview of problems associated with career schools in the US, the likes of ITT Tech. Vocational education should allow people whose job prospects have been creatively destroyed to find new, higher-on-the-value chain jobs.

The US is in the midst of a structural shift, and it won’t be “green jobs” that save us (and foible the Chinese simultaneously). The article illustrates some of the difficulty with actually getting there, however.

Since most training occurs on the job, why not just give the Pell Grants to Microsoft for hiring a new engineer? The simple answer is probably that 1) people being considered for such a position aren’t those who need it and 2) changing the status of the subsidized institution (to a company) would probably lead to similar system-gaming behavior.

So the new house is perfect for me, as the main room looks out onto this:

Dinner conversation with some young women from Chongqing, censorship comes up. Recently the government has been cracking down on all sorts of licentiousness. One of the ladies mentioned that she strongly supported these efforts (especially online cens0rship), since “yellow material can damage the development of young people, especially men.” This would, in turn, make it harder for her to find husband material later on. She continued, “especially foreign sites like Google have lots of yellow material.”

She is of course correct: it is easier to find scantily clad people on Google than on Baidu, though this is due to the efficiency of Google’s search algorithms vis-a-vis Baidu, not simply because it’s foreign, and all foreigners are smutty (though that’s a fairly prevalent meme as well).

I often struggle with making interesting, lasting friendships with ‘locals,’ who I (intolerantly) define as Chinese nationals who don’t speak English and and have no strong interest to learn about global affairs. Were I able to do so effectively, it would be possible to gather more information on a broader range of perspectives.

As a result, expats living here often suffer from a ‘foreign-friendly-exposure’ bias, even if the interactions are conducted in Mandarin, for the simple reason that people are interested in talking to us are much more likely to be politically liberal. The only instances of lasting relationships with a ‘genuine local’ I know of are where people are able to substitute very specific interests (like making out) in place of the cultural gap. Sort of depressing that there seems to be no middle ground.

Ten men and ten women of average looks walk into a meat market bar in Shanghai. Since they are in China the men must use crass displays of wealth and status to attract mates, and each expect to gain 500,000Y of status from marrying (at least their parents will stop bothering them.) These will be split evenly between the two partners in a 50:50 split. Harmony ensues.

If instead there are 10 men and 9 women, as a result of Momma and Pappa Zhou slavishly adhering to cultural taboos that demand production of a male offspring, the results change dramatically: one man will be unpaired, and if everything is equal and he is rational (and wants p00n), he should be willing to spend all of his surplus to securing the affections of a woman. This quickly reduces men’s payoff to just over zero, and women gain 499,999Y from the exchange. Harmony does not ensue as the unpaired male must resort to a selective combination of World of Warcraft and pillow marriage.

Several ‘long-term-mating’ equilibriums will emerge among different social strata. Yuppie urbanites will find a relatively equal gender balance, since they need marriage and children for status. The ultra-wealthy will enjoy multiple partners as the rewards to being an extremely high status male go up, so also will the effort that goes into acquiring the attention of an extremely high status male. Very poor rural migrants will be left with an even worse gender imbalance, and move into some sort of sharing arrangement with lower status females.

For Chinese men, a house is a very important asset in attracting a woman, and not unreasonably as it represents stability amid a rapidly transitioning economy with no real social safety net. Previously I’ve asserted that the link between getting-some (and having a family, I guess) was not that strong, since the low-status men group wouldn’t be in much of a position to afford houses anyway. This paper presents convincing evidence to the contrary, as household savings rates are higher in provinces with higher gender imbalances. A summary:

“The increased pressure on the marriage market in China might induce men and parents with sons to do things to make themselves more competitive,” Wei says. “Increasing savings is one logical way to do that, to the extent that wealth helps to increase a man’s competitive edge. Parents increase household savings mostly by cutting down their own consumption.”

… “We find not only that households with sons save more than households with daughters in all regions,” Wei says, “but that households with sons tend to raise their savings rate if they also happen to live in a region with a more skewed sex ratio.”

Calling something an ‘inflated asset’ and ‘bubble’ requires an a-priori notion of what a non-distortionary equilibrium would produce. If gender imbalances are affecting competition, and as a result, reservation prices for apartments, there will be considerable skew vis-a-vis models that consider income alone.

Oh how it tickles to shop for private health insurance. Nationalize me, will you?! What I’m finding is that: comprehensive health coverage is very affordable for young expats. Most of the plans I’ve examined feature no co-pay at all for outpatient or emergency procedures, and even cover acupuncture and moxibustion at elite Chinese medicine clinics. These are available through most major multinational insurers and allow one to go to international-level hospitals anywhere in the world (outside of the US), and run about USD1,300-1,800 per year, which is certainly less than 17% of income. If the plan includes US coverage, it goes up by about 60%. These plans do not provide coverage for procedures relating to pre-existing conditions for a 24-month moratorium.

Americans are a rather unhealthy people, which might be one of the reasons why we spend 17% of income on healthcare. Yet here I am, an unhealthy American, outside of the US, and actuarial giants such as AXA, AIG, and Ping’an are telling me (through a price mechanism) that I’m going to pay much less purely by the fact that I’m not in the US.

This is probably some part of a wider argument on healthcare policy in general. It does seem that if moratoriums on pre-existing conditions were illegal, insurers would need to raise prices significantly across the board. Effectively they would need to assume everyone is slightly less healthy than previous actuarial models suggested. This is because healthy people will generally know their health condition (or the converse, marginally unhealthy people will probably have better access to that information than a potential insurer), the optimal course of action would be to have a very inexpensive, emergency only plan to begin with. If something that is considered a pre-existing condition emerges, immediately switch to a higher priced, more inclusive plan. If insurers are prevented from price discriminating on the basis of (already limited) actuarial information, they will inevitably be forced to raise prices on all participants in the scheme to make the system solvent. Whether there is some efficiency loss between the two regimes is an empirical question, one which I’m not remotely qualified to address. If no efficiency loss: nationalize everyone. Even better, cover everyone in the world, since the best rates would be possible by covering as large a population as possible (and you get better data). If there is an efficiency loss, then the (socially equitable) course would be to have healthy people pay a tax to subsidize the difference in cost to provide coverage for the unhealthy people. Doing so would, it seems, maintain actuarial standards and provide better pricing across the board.

All theory anyway, and entirely unfeasible given path dependence. If one is young and healthy and American: leave North America and get health care elsewhere. Chances are you won’t need bypass surgery. Foreigners do most other health procedures rather well. In the meantime ancillary factors (walking everywhere) will probably make one happier and healthier. Return home *after* smog induced lung cancer develops.