Taking a periscope view of Biotechnology

Touted as a savior to mankind, Biotechnology was ushered in as the next big wave. The year was 1988 and with the help of emerging digital technology, biological sciences were about to be redeveloped into something that mankind would never have imagined twenty years ago. Just reading the headlines would have put us in cloud nine. “Bio-technology-the new frontier to save mankind from famine, disease and old age” reads most news headlines. It was a time when computers were making the world smaller and communication technology was the great promise to waiting obsolescence.

Twenty years later and after touching double digit growth on a yearly basis, biotechnology seems to have promised more than it can deliver. Undoubtedly, biotechnology has progressed immensely. With the help of super computers, man has managed to identify all the human genes. The future looks promising. The time has come for man to design drugs that can cure stubborn diseases. We should be near the stage where human parts can be grown in labs and food to be churned out from laboratories. Food supply would no more be concern, whatever the weather takes. And we would have no more fears for those super bacteria and viruses that seem to be able to mutate.

But alas, with the world under the spell of recession, where money is in short supply, concerns are mounting due to the cut back in venture funds affecting biotechnology startups. With funds shrinking, research and development in the bio-sciences has been shoved to the back seat. Adding to the problem is the mounting backlogs of patents waiting for examination. To be sure, millions of dollars are being wasted due to slow down of commercialization of university researches. With it, thousand of jobs cannot be realized. Still, hope is set on biotechnology with its many possibilities. No other sectors can even come near it. Just think about it; health, food and fuel will drive mankind to do anything to secure them. We will even go to war if any one of these criteria affects our future.

Bear with us

It is your concern. It is also our concern. Well, it is time to reveal what goes on at the United States Department of Agriculture (USDA). We are talking about the speed at which the department approves new seed; new seed here means biologically modified seed. They used to approve about five new seeds in a year, but of late, especially with the new Obama Administration, things are going slow. They now only approved three. And this has the big three firms going out making noises. Just imagine, we get five new seeds in a year. In a decade, we will get about fifty new ones. It took Mother Nature millions of years to give us those few cash crops like corn, rice and maize. So we are hastening the progress of mankind, or perhaps driving us faster into our graves!

The biotechnology crop advancement was started by Monsanto with its modified and fortified soy bean that can withstand herbicides . Since then, the biologically modified sector has mushroomed into a ten billion dollar industry, and probably will shoot even higher with world weather going into tail spin. The question that has all been put forward is how safe are these seeds? Are we inadvertently eating ourselves to destruction? To be certain, there have been no adverse ill effects, or at least no discernible ill effects. But we can never be sure. Just look at those super-bugs and the mutating flu virus. Things always have a certain trigger point, and we do not have the benefit of a longer term exposure of these modified seeds to know for sure that nothing bad happens.

But who really knows what happens behind those labs? Certainly, the big three, namely, Monsanto, Dupont and Syngenta won’t be telling. Too much is at stake. And the Agriculture Department? Well, it is much easier to play ball as well, rather then to go reverse pace. Indeed, the world’s survival will depend on biologically modified seed to overcome food shortage in the very near future. We just might have to take the risk. With climatic changes taking place in ever more countries, planting food crops might just be that riskier and big economies from the third world might not be able to survive a sudden change of weather. So is the supply of water becoming uncertain, which will immediately impact on the food chain. Unlike oil, we cannot store enough of it to mitigate hunger.

And the debate will go on. Will the third world countries take the risk of embracing modified seed for their crop industries? Time is of course running out fast. For one thing, the agriculture department will have to speed up their approval time for these new seeds, never mind whether who ultimately owns the intellectual property of these new seed. However, with the debate on the viability of granting patents for genes, which will somehow impact on the future of these modified seeds, we will have to embrace ourselves for some sudden shake up of how things come to the marketplace. If we are weary of these new seeds, perhaps we should allow ourselves the opportunity to put planting first and then storing up these seeds for the time when natural seed can no longer exist, due to one reason or another. When we are faced with hunger, then bad things don’t count!

The China Asean AFTA: will there be turmoil?

January 2010 was a milestone of sorts. After years of negotiations, the China Asean free trade agreement (FTA) came into force. It was a grand plan of sorts. For a start, the whole market has a population of almost two billion people. For another, tariff barriers on 90% of the goods between the two regions were slashed down dramatically. The repercussion is that Chinese goods will have very little barrier in getting into Asean. And Asean goods will get easier entry into China. Well and good on the surface but when put into practice, the picture is full of discords.

When we look into the nature of goods from the two parties, we will be able to see what is going to happen. Take the example of consumer goods like rubber shoes (more appropriately called plastic shoes since the rubber parts have been mostly replaced by plastics), we have countries like Indonesia, Vietnam, Thailand and the Philippines producing quite a large amount mostly for domestic consumptions. Now, with reduced entry barrier of Chinese made shoes into Asean, these manufacturers in Asean will not be able to compete with the imports. The result; they would probably have to close shop, just like those in Malaysia.

What about the impact on China? Well, China says since they have the economies of scale, let them make the shoes and to make the equation look good, China says it will buy more of the raw products from Asean. So Asean has to restructure its economy to that of going back to selling raw materials like palm oil, timber and maybe some rubber (for making tires, not shoes). Like wise for other consumer products, there is no future for its manufacturing in Asean. For Asean, the future is going to be raw and semi-raw materials and maybe some high tech products that China might be willing to buy, not necessary to fill its needs (they do produce high tech products don’t they) but to make the FTA viable.

Out of all those important aspects of the FTA, one thing seems to be glaringly absent. That is intellectual property protections. Due to the low level of observance of intellectual property rights in both Asean and China and the lack of solid intellectual property laws and the diverse range of maturity among the group, no agreement has been reached on IPR and it might as well be. Perhaps there is no need for intellectual property protection here! China knows that it has the muscle to produce at the cheapest cost. If any member of Asean thinks that they can make cheap counterfeits of Chinese goods and sell it in Asean, then let them do it. Which obviously they can’t. On the other hand, China is not worried about buying counterfeit raw materials because the buying method is different from consumer products. They know that their money buys the real thing, so there is no need to observe intellectual property rights.

So what about the future? OK, it will probably take a decade to overhaul the marketplace. Asean industries that don’t have economies of scale will just have to wilt. In the meantime, China will have time to ride out the world economic recession. Never mind if the US buyers are not ordering; Asean will take up the slag. Ten years down the line, Asean would have revamped its economy to complement those of China. And there would be no reverse back. China in its part might dish out some investments in Asean on high tech products that have western intellectual contents. It would not be able to attract American investments on high technologies on its shore because it can’t guarantee western IPs in China.

As a result, some members of Asean will have high tech industries with American IPs and Chinese money and they would be termed politically correct. And America would be happy for staying out of the China circle with their IPs and still makes a sale to China via Asean. So will the Japanese, the Koreans and the Europeans stay happy following the example of the Americans? OK, it looks like the best of both worlds and trade war averted. What about India? Well, they of course will gain on receiving outsourcing jobs from the industrialized countries. What more do they want? As for Brazil, Russia and Mexico, probably small investments from the west to keep them in the picture and not allow them to rock the boat!

Is ACTA in contravention of basic human rights?

As far as Europeans are concerned, they have it enacted in the laws that says everyone have a right to be heard in a court of law before they can be deem to be convicted of any crime, and that they are entitled to a fair and public hearing. Not only that, they must be given a reasonable time to be heard by an impartial body dully sanctioned by the state.

According to news going around the blocks, the Anti-Counterfeiting Trade Agreement (ACTA) that is being championed by the US and gaining momentum with many nations agreeing on changing their copy right laws in support of copyright holders, specifically music and video producers, is being challenged by law groups who said it contravenes basic human rights if it were to be adopted.

With the adoption of ACTA, service providers will be given the onus to cut off the lines of customers who are suspected to have illegally downloaded copy righted files from the internet. This power if enacted will however clash with the basic human right law enacted by many states earlier. If the American First Amendment Law were to be taken at face value, then ACTA will surely be deemed as illegal and unenforceable in the US Courts.

Who is wining the music download game?

It used to be in the news everyday: the music recording industry searching every where to find file infringers and bringing them to court. That was 2008. Then, it was the illegal music down-loaders that were targeted. Most of them caught were students who found the university’s servers to be convenient places to do peer to peer down loads. The university servers did offered the students an anonymous internet protocol (IP) address to illegally download music and movie files. It was a laborious method to track down people. But still, a few thousand down loaders were identified, including innocent housewives who don’t do any internet activities! There was a big hue and cry then when the music owners dragged the illegal file sharers to court. Incidentally, most of them were college students and the affected university authorities were caught unprepared. For the plaintiffs, it was an embarrassment as parents were yelling at their greed for money.

Now fast forward to 2010. There is a change in policy. Instead of tracking down the file sharers, the Record Industry of America is quietly making arrangements with university boards to install a music service program where for a small fee, students can legally download as much of the music as they like. They called it the ‘Choruss’ program. It is being tested in some universities and when it is accepted and proved workable, it would then be introduced on a wider scale. And why not? Instead of being termed illegal file down loaders, the students can now get as much music as they want for a small price, and without the worry of being labeled infringers. Surely the parents would have approved of it. Well, if you can’t beat them, join them! That is the way to make money, not using the big stick to drag people to court. In a similar fashion, the same scheme should be extended to the man in the street as well. Thanks to Apple’s pioneering of less than a dollar piece of legal music, the rest of us will hear less of people being dragged to court.

How to go about setting up an MSC Status company

Many people have heard of MSC Malaysia Status companies. They have always wondered whether they too can set up one and get to enjoy the many benefits of attaining the prestigious MSC Status. Truth be told. You can get an MSC Status company up and running if you are that determined to do so. It is not that difficult anyway. Here are some pointers that will help you if you are interested to have an MSC Status company in your stable.

MSC Status is opened to both local and foreign companies. Unlike in some restrictive countries, you can have a hundred percent equity even if you are a foreigner. There are big and small foreign companies operating in MSC Malaysia. Some of the big names include Microsoft, IBM and Motorola. They normally set up base in MSC to do research and development. There are about 2500 companies with MSC Status and local setups makes up three quarters of the total.

When MSC was started in 1996, the idea then was to attract world class companies to bring their technologies here. Malaysia was then interested in information technology. It was then the in thing to do, and Malaysia came up with a plan to build a township to house all and sundry to research, develop and make information technology products and services. The original MSC hub was about seven thousand acres and was built from the ground up. World class infrastructure was laid with fiber optics cable, planned roadways and transport systems, affordable housings and a multimedia university to boot.

As activities expanded, MSC Malaysia has roped in other satellite areas (called cybercities) in the country and to accord them the MSC Status as well. For companies to be accorded the MSC Status, it has to be sited in the MSC designated area. As more companies have achieved MSC status, there was a need to extend the MSC area to other less developed regions in the country. As a result of the decentralization move, new areas have been accorded MSC status including Penang, Kedah, Johor, Malacca and even in Sarawak. There are also other purpose built areas and enclaves in Kuala Lumpur as most of the MSC Status companies find it necessary to locate in the capital.

Today, MSC Malaysia has expanded its activities to multi-media animations, outsourcing companies, educational setups, technology incubators, biotechnology, bio-pharmaceuticals and new materials. So with the expanded scope, entrepreneurs will easily find something that they can do. The MSC Malaysia is a government initiative, and being one that is being run with a ten point bill of guarantee, it has attracted world attention. It has help create over twenty thousand knowledge workers and thousands of high technology companies. It is a shining example of a twenty first century vision of what an advance economy model should be.

For a better understanding about obtaining MSC Status, go to MSC Status Insights

My Gene is your Gene?

According to the books of Myriad Genetics, it is legally correct to be granted a patent on DNA sequences as long as they are claimed in the form of ‘isolated DNA’. Myriad had threatened anyone else using its patented method to test for breast cancer gene! But many others disagreed and among them were the American Civil Liberties Union (ACLU), who were deeply concerned because accordingly, granting a gene patent is morally wrong (in reference to the USPTO).

The repercussions were dire as it would mean that what has been given by Mother Nature has now through a stroke of the pen belonged to some erstwhile lab testing company. The public protestation even brought in Public Patent Foundation, who together with ACLU sued Myriad. The case was subsequently heard in the US District Court. The presiding judge, Robert Sweet, subsequently invalidated Myriad’s gene patent saying that ‘nature’s law’ should not be considered a patent as there was nothing new. However, Myriad will be appealing the judgment and the case will most probably move its way to the US Supreme Court. The final verdict will have great repercussions for mankind and everyone will be watching because a part of their body’s ownership is being contested!

Patents are serious matters, but understanding what they are and how they can be optimized and to benefit you will need much reading and digestion. You can start by visiting How to go about increasing the value of your intangibles

Piracy can't be contained in China

In a recent hearing, the US House of Foreign Affairs Committee was briefed on the seriousness of the lack of China’s protection of intellectual property rights. According to the report, it was found that 80% of PC software used in China was illegally copied. In reality, the figure could have touched ninety percent as a large number of software used in rural areas which was outside the surveyed area were suspected of being cheap rip offs. An indication of the extend of piracy is the increasing number of court cases.

What exactly is being pirated in China? Computer software is one of the most popular items that get copied around. It’s easily done, without people noticing, and with very little enforcement by the authorities, people just treat illegal copying as legal. Now, if you want to check on software, you have to check it at the company offices, and that cannot be done that easily. There are walls all over the place, security barriers to go through before you can get to the computers. When authorities did manage to penetrate these barriers, users are tipped off immediately; the result is that no copies of pirated software are found. Neither is home users easily napped for using illegal copies.

Of greater concern is the ease of obtaining illegal copies of movie DVDs. It is one of the hottest entertainment items. You can virtually get a copy anywhere and at dirt cheap prices. The network of illegal DVD pushers is so extensive that the moment one of them is being caught, three others are being recruited. It is the poor man's tobacco, so you don’t have the heart to arrest them for going illegal! From the point of view of the government, arresting procurers of pirated DVDs will make people angry with the government. It is therefore logical to close one eye and make the people happy, least they form a revolution and change the whole government.

Get to read more about China IP at China Patent Idea

What are your job options if you have a degree in law?

If you have been trained in law, then you should choose to practice in law. Unfortunately, not everybody knows what is best and in many instances, when they chose to take law in college, they did so without any clear idea of what they want to do. Youngsters normally follow the advice of their parents, and some parents really like their children to take up one of those prestigious jobs like lawyer and medical doctor. So, just to be obedient, children just obeyed their parents and pursue a course that sounds glamorous but not what they had wanted to do in the first place. And law students are one of the more maligns of the lot. You can study law and be knowledgeable about law, but to practice it in court is another thing all together. Luckily, law students need not begrudge about their predicament as there are other careers that are equally satisfying. Here are a few of them.

Legal Officer

You will find that there are many companies both large and small that employ a technical person knowledgeable in law. There are contracts to be made between company and employees, contracts with clients, legal documents to be enacted and of course there are trademarks to be pursue and in certain cases, patents and copyrights to enforce. All these will require a legal person to undertake and prosecute. So, there is a need for a legal entity and in some large corporations, there might be a need to have more than law officer, each specializing in various fields.

Knowledgeable in intellectual properties

With many companies having built up their intellectual property (IPs) portfolios, there is indeed a need to have an in-house legal advisor on IPs on the team. Companies used to treat IPs as something that came about out of the blue and they only find the need to ask their IP lawyer for advice when there is a need for it. It is of course costly to consult an outside IP attorney, who would most likely charged by the hour. Depending on the type of business, most large companies should employ an in-house team knowledgeable in IPs. Enforcement of trademarks will be better done with a full time officer who can track what is happening, as infringers can come from anywhere in the world. For those that have valuable patents, it is more cost effective to have a team member who knows how to go about enforcing its intellectual property rights.

There are of course other matters that require a person trained in law, like a private practitioner who deals with will drafting. As properties and inheritance become hotly contested items, having a proper and timely drawn up will is becoming very important for the family just so that they won’t be squabbles later on. And of course, not forgetting that there is also an increasing demand for law lecturers in colleges and universities, so going out and teach what you have learned can be very satisfying. As economies get more sophisticated, many countries have found that they have inadvertently become also more litigious among its citizens. It would not be too far fetch if the companies of tomorrow find the need to have at least a member among themselves trained in law. You never know who is watching who now and taking people to court is just so common that companies would be better off equipped with a management that knows what constitutes a legal move.

More about job creations at Just more job creations

This is where a world trade war begins

In late 2009, with world recession bringing out the worst in economies, and after many great financial stimulus campaigns, China came out with new conditions for bidders of Chinese government procurements. It now demands that companies bidding for government tenders will have to have intellectual properties (IPs like patents and trademarks) originating from China. What it means is that foreign companies will have to register their IPs in China first, and preferably even relocate their R & D to China before they can qualify for Chinese government tenders. This must be one of those new defense strategy that the Chinese are so familiar about; Sun Zhu war strategy. China might have foresaw the unreeling of the world economies! They are perhaps pre-empting the collapse of the world economy. With the big economies reeling from economic stagnation, any form of trade protection will easily start a trade war. Indeed, one has already started.

To make it worse, Google said it will withdraw from the China market come April 2010 after telling the world that its site has been hacked and the Chinese government putting up censorship requirements on its operation. There was also the issue of intellectual property thefts. The China market seems has to be a no go area for foreigners. China's priority seems to be to safeguarding its own economy first, and does not care about what happens to the rest of the world. With China expecting to be the second largest economy in the world comes 2011, whatever happens in China will greatly affect the recovering of the rest of the world’s economy. Already, China is winding down its ownership of US treasury papers in early 2010, with the effect of causing the value of the dollar to be destabilized, and followed by a rise in oil prices, the rest of the world can only just watch by. Is China factoring in the fall of the dollar and the collapse of the US economy, or is it more concerned with its own financial stimulus plan which has to be dis-continued? Perhaps bringing some funds back to China and help propping up its domestic economy is a safer bet?

However way we look at it, 2010 could end with great upheavals, if not in the Americas, then perhaps in the EU. There is just too much rot in the developed countries and very little solutions to cure those ills. Over in the US, job creation just seems to be unsustainable. There is money in the banks, but nobody dares to borrow for fear of not being able to repay loans. As a result, most industries are just opting to sustain themselves by hiring workers only as a last resort and by contracting workers on a monthly basis. With the major economies stagnating, and some economies on the brink of insolvency, and when shove comes to push, there is a real danger that economic walls will be the only option. But if a trade war indeed comes about, then when looking back, we will surely have to nail its cause to the housing crisis back in the US in mid 2008. Will we learn any lesson then? Not likely! Its laissez faire as usual!

Your MSC status company benefits

Would you want to startup a company and get all these benefits? It is called the MSC status company benefits and they are:-

• Getting Pioneer Status (on easy terms) - 100% exemption from taxable statutory income for ten years.
• A 100% Investment Tax Allowance (ITA).
• Freedom to source capital and borrow funds from any sources.
• Duty free import of sophisticated multimedia equipment (DFI) for your enterprise.
• High-powered one-stop agency to assist your business startup.
• Easy remittance of fund out of the country with a no hassle policy.
• No undue censorship of the Internet.
• Freedom to importing knowledge workers.

There is this jewel of a place where you can startup your business and get loads of incentives including financial, logistical and market access. It is called MSC Malaysia. If you are into new media, information technology, animations, biotechnology, bio-medicines, bio-pharmaceuticals, new materials, generic medicines, and alternate energy, then MSC Malaysia is the place to be. A government development center, MSC houses all the big names of industries like Microsoft, Intel, IBM, Shell, DHL, Ericsson and many others. It does not matter whether you are big or small; all it takes is that you have something new and potential and you would like to share it with the world. MSC sits at the center of over two billion population and growing fast by the day. It also has the world’s largest free trade agreement encompassing China, Australia, Japan, Korea and ASEAN so you will have no complaints about the market. Would you not blink your eyes? If you are interested, surf over to
MSC Status benefit to learn more about this jewel of a place.

Does a Rapid increase of number of patent filings in China indicate its trading prowess?

The statistics shows that in a year where everyone is trying to recover from the financial crisis, there is a dip in the amount of intellectual property filed with the various bodies. According to a World Intellectual Property Organization (WIPO) statistics, there has been a reduction of PCT (Patent Cooperation Treaty) filings from around the world by as much as 4.5% in 2009. There are no surprises here. One main reason being that people are busy trying to salvage their companies in the light of dipped sales. It would only be logical that some of those funds earmarked for use in intellectual filings be allocated to something else that is more life threatening. However, looking deeper into those stats revealed that in contrast to the Western countries, the Eastern block of countries comprising China, Japan, Korea and Taiwan shows an increase. IP filings can wait. Indeed, China became the fifth largest PCT filer with a strong growth rate of 29.7%, representing some 7,900 international applications. These figures are giving those technocrats in Washington nightmares. In the same period, the US filing rate fell by over 11 percent. But does a fall in filing an indication of trouble, or for that matter does an increase indicate a great prowess?

On the surface, it does seem as a troubling sign when the IP filings dip because IP filings always precede the actual output of products, sometimes by three to four years. If there is a continuous decline for a few years, it will result in a declining growth for the future. However, IP filings today is quiet different from years gone by. The phenomenon started when the USPTO begun granting patents to software and business processes in the eighties. The result was an immense surge in the number of IP filings from all quarters. It was like a gold rush, notwithstanding that IP filing cost went up by several notches. It was more like every Tom, Dick and Harry putting in their last dime for a piece of cake. Fast forward to the days when in China, already swelled by a large and surging direct foreign investment, together with plenty of government encouragements, people were beating each other to file whatever they have in hand, never mind if it qualifies at all of being patentable or not. The factories were running at almost peak levels and the people running the R & D department had to do their share too. So it was a race of sorts; a race to beat your fellow men to see who is more sophisticated.

From the point of sophistication, it would not be surprised to find that there is very little matter in the China filings. Most of the patents don’t belong to those cutting edge types. Indeed, most of them are just variation of existing items. It is more of like patent splashing. You just go out and buy yourself a few cans of paints and start to splash it all over the place, like painting graffiti. That is just what is happening in China, and to a lesser extend in Taiwan and Korea. There will not be any revolutionary technology coming out from there. We can be sure that in another decade or so, those products with a make in China tag will not change the way we do things, like what Apple, or even Google had pioneered the way of life as we know of it now. The reason is because people’s mind takes a long path towards innovation and that has not occurred in China as it occurred in the west. It takes time and plenty of space. In particular, a space of free enterprise and an entrepreneurial spirit that is not constrained by the state and authorities. China has been a great factory backyard helped mostly by American money and buying power. In its endeavor to catch up with the west, it has invested a lot of money in enlarging its pool of technocrats and engineers, but sadly to say, you need something more to be able to bake that cake. You need freedom, freedom to explore, and freedom to do what you like, without having to be fearful of going against the grain.

There is no protection whatsoever—wherever you may be!

The headline reads-----"40 people killed as they were about to start praying in a mosque when its minaret collapsed". The historic mosque, situated in the town of Meknes in Morocco, is an 18 century built edifice from adobe, a sun-dried brick of earth and straw. At the time of the tragedy, the mosque was packed with worshipers for their Friday prayers. A tragedy no doubt and of all places it happened in a place of worship! Of course this is not the only tragedy of its kind. There had been many such happenings all over the places. It does beg the question of whether there is indeed such a place where man can be save from the elements and it seems that even the almighty up there could not do anything?

Some would choose to call it an act of divinity. But whatever makes it happen, mankind will not get to learn about it, whether in this world or hereafter. No matter what mankind built, there is no protection what so ever that it will remain in perpetuity. The wind reminds us that it is uncontrollable. The sun is more forgiving by its sure rising and setting from the horizons. And the weather……….? It is now a big issue. More like mankind burning out of control, after being addicted to comfort derived from the use of fossil fuel. From the seas and oceans, man has harvested its richness and in its wake, left nothing else but utter destruction. Tell it to the Japanese that they should not kill off the whales and you get an astonished look like it was never written in the bible. The killing has to go on…just so that the restaurants remain viable and the hunger can be appeased.

If one were to look at all those sinful things that man secretly did, there is absolutely no reason that the almighty should give man its dues. Mankind, the modern type, is always seeking to satisfy his hunger for more, for mightier, and for grander lives to live. Many things are taken for granted. Like a chosen son, the priority must be man himself, even though there is no such edict. Look at the other species that are unfortunate to share with us this world; they have not got any protection at all. In fact, they are more likely being harvested to satisfy man’s greed or if they were harmful to man, then they become the target of extermination. Sometime even ruthlessly exterminated, as if they don’t deserve to be on the ‘A’ list! So man, the destroyer, should not get protection what so ever from the almighty, regardless of whether they belonged to the sinful or the sanctimonious class. To the animals and the birds that roam our earth, there is only one thing; that they obey the natural laws like eating to appease hunger and to pro-create. Perhaps mankind should abandon or played down all those things that they said they are doing in the name of the almighty!

It’s too late dude, we have bought too much rubbish!

Yes, the situation is quite hopeless. We are of course talking about China. Google just revealed that doing business in China is just a stupid idea. In reality, you can’t make Chinese money like the way the Chinese make American money. Reality bites and it is painful. Least many people are carrying buckets of money to dump into Chinese factories, let it be a reminder that China has the dubious title of being the world’s largest un-elected government. It is also propped up by an active army of over two million troops. And there is no such a thing as human rights there. What the government does, no body can say no to it. And it takes another brave giant like Google to confront it head on and loose the fight.

But China is unlike any other country. It holds about two trillion dollars worth of US security papers. If Chinese interests (read as those who govern China) are threatened inside their country, then either of two things will happen. Either the rulers will escape from China and head for the US and live off the money that is stashed away in the US, or if the threat is from outside China (could be outside forces working inside China like Google or Baidu), then China will throw their security holdings into the market and destabilize the US dollar! Either way, it looks like a no win situation for everybody.

And how did the present situation came about in the first place? There is no doubt that it came about because of the great buying spree from the Americans for Chinese goods for over a decade and a half. The situation was made worse by the mad rush to pump in money into China to start even more manufacturing plants (mostly American money). Today we have an excess of Chinese factories making everything from Christmas trees to nuts and bolts, and their outputs have to be channeled to Chinese domestic buyers as western orders withered under the strain of global monetary crisis. Traditionally, the Chinese don’t buy made in China products if they have a choice. So the Chinese government pumped in 650 billion and gave the money to its citizen to go on a shopping spree. Fortunately the trick did work, but then, how long could the prime pumping last?

On of the side effect of the infusion of money to the Chinese citizen was that the realty sector got a boost. Not that it is no good for the housing and property sectors, but it is just bad economics for a large number of village folks beating each other to buy property for perhaps the first time (under the communist system, their cadres live in low rent houses provided by the state) With easy loans from banks (the banks were told to extend lending), property prices just ballooned because of the artificial demand. You just can’t build houses fast enough. Besides, the Chinese people have that pent up feeling of buying for themselves so called ‘affordable luxuries’ so that they can at least consider their life not wasted under the communist regime. For years, they have heard so much of their brethrens enjoying luxurious living (from their point of view) in South East Asian countries.

Fearing that the situation in China could get out of hand, the Chinese government has just instituted lending tightening. Fears of asset bubbles are just too great and real, no thanks to the knowledge that a similar bubble had catalyst the start of the financial meltdown in the US in 2008. What happened in the US should not be allowed to happen in China because there are about a billion frustrated people there waiting in the fringes for a chance to change their government! And whatever happens in China would have a great bearing to the rest of the world as well. Only the total melting of the polar ice caps is more frightening, perhaps!

Are we moving into a double dip recession?

2009 is over, and might as well. There was not much of a hope then; after all, we were struck by the world economic crisis of end 2008, which was caused by the housing crisis of the US. Other things came into play as well, especially the shooting to the roof of oil prices and other commodity prices. In retrospect, there was this over confidence in everything. It was early 2007 and because everybody was so sure that they could just buy their way to riches. The credit card people were signing up everybody they can lay their hands on in the US. Even retired people who have no more jobs were lured into subscribing to the plastic card. And as a result, it was spend, spend and more spending, without having to worry where their next dollar was coming from. So were people asked to buy houses and entered into mortgages that they can’t afford to pay. But then, nobody cares, and the authorities who should be the guardians, never even bat an eyelid! One bad thing leads to another and thus begun the world economic crisis.

The shock came when Lehman Brothers was declared bankrupt at the end of 2008. The reverberation from the bank collapse went round the globe. The impossible has happened. At the other end of the globe, in China, people were still grappling with production runs, unaware that the orders that they had secured before would not be honored by buyers that had suddenly have their bank credit cut off. It was here that all the good things got started. With China getting to host the Olympics in the summer of 2008, there was a mad rush to build stadiums and sport facilities. It was this foolish undertaking that caused commodity prices to shoot upwards. The oil price increased followed suit and everybody then has to chase around for most of the things that is available for buying. Food prices went so high that poorer countries had to seek World Bank loans to secure just enough food for their citizens. But in the US, the buying binge just went on as usual, with budget deficit shooting through the roofs. The people here never for once believed their money will run out; after all, there are so many countries that found it convenient to park huge assets in US Treasuries.

Unfortunately the truth begins to strike just when everybody is off guard. The reality is that you can’t go on spending without the roof collapsing. And the roof did collapse with Lehman Brothers as well as many others. 2009 was a terrible year as far as my memory goes. For once, people have to pray very hard, just so that they can get their next order. But orders just simply disappear. Nobody seems to be buying any more! The governments around the world were shocked beyond beliefs. When the reality set in that there is a money crisis, governments around the world had to dig deep into their pockets to put money into their citizen’s pocket so that domestic consumption can continue. In this respect, China had to pump in six billion dollars just so that their manufacturing set-ups can survive the drought of orders from the US. In the US, the government had to buy into the banks and restore confidence so that there are no runs on banks. So too were countries like UK, Germany and Japan, where arrangements were quickly made to pump prime their economies to prevent total collapse. And they hope these measures will get them trough to the next wave?

Looking back again at China, where domestic consumption have continued unabated, the financial policies seems to have worked. But on deeper digging, we find that although the economy is surviving, there is an undertone of great anxiety. The confidence level is no more like pre-Olympics level. The manufacturers are just holding their breadth. Although orders seems to be picking up, the reality is that these orders are coming from goods that are destined for year end festive sale for the US and Europe. What will happen after Christmas? Will there be continuing orders then? If we were to look at the situation in the US, where it is supposed to be the consumption market of the world, there is dark cloud everywhere. Unemployment is everywhere. Due to the financial crisis, firms had managed to trim down to a size that there is no unnecessary bleeding. A lot of inefficiencies were blotted out. The result is that there is no need to look for workers to help out. Everybody is working trim, and when there is real work to be done, overtime is the preferred way, just in case the order dropped off the cliffs unexpectedly.

To be sure, there has been an increase of goods orders. But the reality is that these orders are mostly to replenish those things that have been made to run low due to the economic crisis. ‘Unnecessary inventories’ is that dirty word that nobody wants to be caught out with. So what we see today is a world working with very little fats. It is a new order indeed! It is a world working on the Toyota model of ‘just in time manufacturing’ where you will only order parts for assembling when you get a real order. It is no more speculating, and you do not buy forward at a low price to profit and sell at a higher price later. It is a ‘lean economic’ model. But it is appropriate to look closely at China again. A lot is still going on in this middle kingdom. They are not only buying commodities to sustain their manufacturing, but they are also buying companies around the world, and other big brands as well. Of course they have a big pocket and they still work on an old world basis. It is the Chinese mentality. They know that it will work as there have been seen to work for thousands of years. But it is a new world order. Having the power of a holding cost might not necessary get you to the next doorway!

And the Copenhagen affair is over and gone! There was much hope that the world will be able to take the opportunity to come to an agreement, between the rich and the poor countries to effect an upgrading in technologies that can affect our climate. Unfortunately, nothing came out of it, and it is doubtful there is salvation to that. The truth is that the rich countries or their governments do not see it as a good political move to give away the much need money and the poor countries can’t afford to make any changes to their technologies as there is no more money around. Overall, the world will be heading towards self destruction by over burning their fossil assets. But because there is no inertia of the monetary kind, and when money doesn’t flow, the poorer economies will get poorer and thus will impact the recovery of the world economy. People are just waiting for the mullahs to come and they will still be waiting come 2012 or even later! We have missed the chance to get a turnaround this time.

There has lately been a fear that our economic problem is veering into a double dip recession. This has been sounded out by non other than the Honk Kong Chief Executive in a New Year message. He should know what he is talking about as he can see the money movements (or the lack of it) and he is close to the manufacturing heartland of the world. He cautioned that a double dip recession is a possibility. From the way it looks, especially the scenario in US, UK, Greece, Spain, Iceland and some other unfortunate countries in Africa, there is indeed a new world order. One in which the majority of the people have no money to continue their consumption behavior of the past. A closer look at the US will tell us that for Americans to continue spending, they will have to print more money and hold inflation level at the 2009 level. It is a double blind for the US government. To print more money will devalue the dollar against other currencies and will effectively made buying more expensive for Americans. Inflation will reign and the poor will get poorer. Buying spree will nosedive. As a result, the world’s manufacturer (especially China based) will go back to receiving no new orders. How much longer can they hold? Perhaps another economic prime pumping exercise again? Is it possible for a double or even a triple dip recession?