Thread on Invisible China: Scott Rozelle and Natalie Hell's illuminating and scary deep dive into rural China's ills and stark inequality. No matter how bad you think it is, it's worse there---more like a developing country than a global superpower. 1/n
2/Rozelle rolled up his sleeves to understand the CN most only see from plane or train windows. Issues in health and education, bringing down human capital of 300m rural Chinese, could trap it in middle income status.

Think future like Mexico/Turkey now, not Korea/Taiwan
3/Most focus on impressive elite universities and high schools topping int'l rankings, but CN average education levels are abysmal.

Only 30% of China's working age pop completed high school--last place for all middle income countries, worse than many poor countries!
4/TIL a startling fact: school in CN through grade 9 became free & mandatory only in 2006! Even today high school is not free in CN! Want to go through grade 12? Pay fees of 10-15x incomes for poor rural areas. Instead they drop out to work unskilled jobs. Xi has promised to fix
5/No country has escaped middle income trap below 50% HS grad rates, and avg for successful countries (now high income) is 76%. Why? HS skills not important for repetitive assembly jobs, but w/o ability to learn & basic skills in math and reading, can't do more productive jobs
6/Even worse, many of these HS attainers go to "vocational schools" that on average give ZERO useful career skills and NO measured improvement in math/reading. Literally teaching people VHS and tube TV repair. Gov spent tons to build nice facilities, but it's wasted
7/The invisible human capital disaster starts early. 50% of rural CN toddlers/infants are developmentally delayed, parents don't know need to talk/interact. So sad.
PLUS, 60% of rural Chinese kids have at least one of:
-Anemia from malnutrition
-Worms
-Bad vision but no glasses
8/ Fixing anemia, worms, and vision would be super cheap, costing less probably than a few miles of largely unused expressway, but little to nothing is being done.

Lots of progress in recent years boosting HS numbers and building, but China will need decades to catch up.
9/Worrying: CN school rates today same as Mexico when it ran out of surplus labor. Wages rise, ppl lose jobs, can't get new one b/c factories move where cheaper. In MX, result was rise in informal econ & crime. CN not Mexico, but risk is real
10/Why should rest of world care? Rozelle & Hell argue that economic fallout of stagnating China would be global, esp hurting CN supplier countries, and lead CCP to use more strident nationalism/bellicosity to retain support of a left behind populace---a dangerous cocktail. FIN

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More from @ChorzempaMartin

4 Jan
One thing I've been thinking about recently is that for Chinese firms, an IPO can be dangerous. Why? Attracting the wrong sort of attention. A quick thread with two examples (Ant is obviously one) 1/n
Ex 1: Qudian, a high interest small loan company that raised nearly $1b USD list October 2017, company then was only 3 years old. It had 7m borrowers and $5.6b in loans at the time of IPO. The secret to its success? Partnership with Alipay, whose user base turbocharged growth 2/n
Chinese authorities were aware so-called "cash loans" (like payday loans in the US) were a fast-growing business w/lot of risk and rampant abusive practices, but it was not until the IPO disclosures that they realized just how big it already was. So they slammed on the brakes 3/n
Read 10 tweets
18 Dec 20
A quick thread on today's big new additions to the @CommerceGov entity list, why they may backfire, and why will be hard to roll back: 1/n
The main firms that can now no longer buy US tech or goods are SMIC (China's main semiconductor manufacturer)--but only for the most advanced semi tech, DJI (world-leading drone company), a big state construction and shipbuilding company, some in biotech, and universities 2/n
Commerce argues that all are acting against US broadly defined nat sec/foreign policy interests, from Civ/Mil fusion and Xinjiang to South China Sea. You can see the whole list and rationales here public-inspection.federalregister.gov/2020-28031.pdf 3/n
Read 6 tweets
15 Oct 20
Thread: Adding Ant to the entity list is a terrible idea.

If the bar to harsh US actions against a CN company is simply global success and innovation, USG plays into and strengthens the CN hardliner view that it US just wants to take CN down
scmp.com/news/world/uni…
Note the lack of real national security justification to give this action ant real legitimacy. No sanctions violations like ZTE/Huawei, and Ant isn’t actively going after US users, so “sensitive data” on Americans is bogus. Alipay is accepted in US but mainly for CN tourists.
any impact on Ant would prob be symbolic. I’m not aware of any major
reliance on US tech/products (except dev tools for Android and iOS, which may or may not fall under entity list—any experts on this know?) IPO still goes on, it expands internationally, and US controls look weak
Read 4 tweets
25 Aug 20
#Ant Prospectus Thread: Ant dwarfs any other #fintech company, but in past (frustratingly for researchers like me) disclosed few, sporadic details abt user #'s, assets, pymnt vol, bad loans, etc.. Prospectus is a treasure trove 1/n
2/n
Payments: 711 million active Alipay users, 1/2 of China's entire population. 80m merchants accept.
118 trillion RMB (17t USD) in payments last 12 mo, 622 billion x-border

Credit: 500m authorized borrowers, 2 tn RMB in consumer and small business loans outstanding
3/n Investments: Half a billion users with over 4.1 trillion RMB (600b USD) invested on its platform. Expanded far beyond Yu'E Bao with most of China's major asset managers vying for $$ from Ant's 500m users.
Read 10 tweets
26 Nov 19
Cannot overstate how big a deal this is: proposed rules for ICT supply chain exec order dropped today from @CommerceGov would give gov't unprecedented , sweeping authority over the tech sector. This goes miles beyond Huawei 1/n (h/t @pstAsiatech)
commerce.gov/news/press-rel…
@CommerceGov @pstAsiatech It would create a new #CFIUS like body at commerce for case-by-case review if one wants to import or install ICT tech/equipment/software developed in "foreign adversaries" (e.g. China, Russia). If commerce/intel community thinks it is risky, can force changes, and reject 2/n
@CommerceGov @pstAsiatech This could be the ultimate decoupling tool, giving gov authority to shut off Chinese electronics' use in US. Commerce ICT definition is "information or
data processing, storage, retrieval, or communication." Read: phones, any #IOT device, smart TV, hard drive, routers... 3/n
Read 4 tweets
10 Jul 19
Quick thread on #China response to #Facebook #Libra. It is the greatest threat to Chinese fintech dominance now and they know it. CN tech firms have not yet gained many users internationally, unlike US tech. US tech has not, however, had fintech success of Alibaba/Tencent 1/n
2/n In response they are speeding up central bank digital currency plans with Ant Financial, and even raising the possibility of loosening domestic cryptocurrency regulation to ensure there is a Chinese competitor. My primer on CN crypto regulation: piie.com/blogs/china-ec…
3/n They warn, rightly, that many people might dump unstable local currencies for Libra, which could lead those currencies to fall and disrupt economies. But of course, they want to warn other countries against allowing an American firm to design a currency used internationally
Read 8 tweets

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