David Korn Summary of Moneytalk Guest Robyn Meredith

David Korn has generously granted me permission to share this outstanding excerpt from his newsletter. This is David’s summary and interpretation of the discussion with Bob Brinker’s Moneytalk guest on Saturday.
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"David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, andSpecial Alert E-Mail Service. Copyright David Korn, L.L.C. 2007 Web site: http://david-korn.blogspot.com/
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December 1-2, 2007 Newsletter
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MONEYTALK GUESTS
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On Saturday, Bob had on Robyn Meredith, a foreign correspondent for Forbes and author of the book, "The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us." Robyn lives in Hong Kong and said that based on her observations of what was going on in India and China, she felt that most people in the U.S. didn't really appreciate what was going on in those countries. I thought this was an important topic and an interesting discussion so I covered the interview below.
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1. Bob first asked Robyn about China's imports and the recalls we are seeing in the headlines. Robyn said it was a wake up call for Chinese producers, as well as the American companies that purchase Chinese products and simply put their name on it. Robyn said there is probably a higher percentage of unsafe products coming out of China versus other countries because regulators there can easily be bought off. In fact, products that are sold in mainland China can even be more shoddy, to wit: an infant formula that the manufactures made which left out protein for economic reasons resulting in many babies getting very ill.
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2. Robyn said that products imported into Japan are very thoroughly checked, not only those that come in from China, but also imports from the U.S. As far as the contention that the U.S. doesn't do enough to check its imports, Robyn said that the volume of imports from China is so enormous, it is unrealistic to expect that we could check them all. The American multi-national companies such as Mattel are realizing that their own brand name is at risk if they don't put in procedures to ensure that the products they repackage are safe.
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3. America's competitive position in the world is changing, due in large part to the growth of the economies in China and India as well as technological advances and globalization. Americans, as a whole, have not really come to grips that we are competing for jobs on a worldwide basis now. Two giant nations, each with over one billion people, have embraced capitalism at the same time they are rejoining the global economy.
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4. Robyn said the Chinese communist party is running the country; however, their economic system is capitalism. There are still lots of remainders from the communist system and many of the large companies are still partially state owned. There are a lot of private companies, a stock market and a banking system that was not there too long ago. The communist party is there to preserve their party's grip on power and keep the country together. Overall, China is moving away from the communism and embracing capitalism.
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5. China has a giant pool of savings and spends most of that money purchasing U.S. Treasury securities. It threatens once in a while to use its trillions to purchase euros instead, although if it did that suddenly, it could disrupt the global economies, most of all the U.S. In that sense, China now has economic power over the U.S. China has almost as much power of Japan, but Japan is now a long term ally of the U.S. It is worrisome that they own such a large stake in our bond market, but if they dumped them, that would be tantamount to economic war. On the other hand, as long as Americans remain consumers to the world, China will be producer to the world, and India will be the back office of the world.
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6. Robyn thinks we are at a critical point in our history. There is a lot of talk about China and India reinventing themselves, but what about the United States? China is becoming a big export market for America and that presents opportunity for us. India's insertion into global economies has also provided opportunity for U.S. companies. Between India and China, over 200 million people have risen out of poverty due to their economic growth, which is something we as a country strived to do with our aid programs, but were not able to accomplish.
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7. People don't have to immigrate like they used to because now jobs can immigrate. America has benefited from immigrants and Robyn said that she was puzzled by how the immigration debate in the U.S. has headed. She noted that since 9/11, we have kept out many very smart people from immigrating to our country and we are helping foster a brain drain of people who love the U.S., but are now moving to India and China.
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Caller: This caller noted that China has the money to purchase American companies. Are there any checks on our transfer of military technology? Can we sell them any electronics or computers that could be used by China against us? Robyn said there are a number of checks for sensitive technology, but for dual use systems it is more problematic. There have been cases prosecuted were American companies sold a product to China for one purpose, but China used the product for military purposes. The U.S. does have on the books strong export control laws that are designed to prevent such a thing, not only for China, but for other countries as well.
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Caller: Why should China purchase anything from us when they can make it cheaper in their country? Robyn said that China can make most products that are labor intensive cheaper, but not everything. For example, China imports a lot of airplanes from our country. China cannot make an airplane of such high quality that Boeing makes. The complex advanced goods will be made in the West for the foreseeable future, although China is catching up in those areas.
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Caller: Why should we reduce our standard of living to accommodate other growing countries? Robyn said that she does not believe that we, as U.S. citizens, have any God-given right to earn 10-times more than anyone else in the world for the same work. As a nation, we have to recognize that there are now in excess of 1 billion people that are now going to be competing for a higher standard of living. This is a challenge, but also an opportunity. We have to understand and appreciate that reality which is not going away. If we want to keep our standard of living high, we are going to have to work and reinvent ourselves so that we are worth the higher standard of living.
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Caller: The governor of Minnesota has encouraged its schools to teach Mandarin Chinese. Is that the language of the future? Robyn said that it will be one language of the future, but not for another 10 years or more. It couldn't hurt to learn, and Robyn said her own son is learning it. However, English will remain the main language of the world because all of the European nations are using English as a de facto language and people from India speak English as well.

Caller: There has been a tremendous influx of Asians into Australia in recent years. Will Australia ultimately be a country of Asia, or will it remain a Western-type nation? Robyn said Australia will remain a Western ally for the forseeable future; however, Australia has seen its exports to China grow the most. Australia's mineral industry is sending a lot of those resources to customers in China. That is happening to many countries that produce such resources. This is shifting geopolitics around the world particularly in Africa. China is basically economically colonizing Africa as we speak because those countries have a lot of oil, natural gas and other resources which China needs because its economy is growing.
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Bob: How is the pollution in Hong Kong? Robyn said it is horrible and worse than many people in the U.S. even realize. Robyn said she keeps an air cleaner in every single room of her apartment so that at least at night when she is home the air will be clean. It is hard to conceive of how bad the pollution is in many mainland cities in China. Next time you see a picture from there, look at the background and you will think it is out of focus and grey, but in reality it is pollution that is preventing you from seeing the buildings in the background. The pollution is dramatic.
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Bob: How are China and India treating women? Robyn said that there remains a strong preference for boys over girls which results in many more boys being born then girls. Now that we have cheap ultra-sound machines, it makes it much easier for people to choose the sex of their babies. This is going to have significant sociological problems down the road when there is a huge imbalance of the number of available women to marry.
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Caller: This caller said his entire life he has heard that communism is bad and yet here we are supporting their government through trade. Do you think that the Chinese government would treat us any better than they treat their own people? Before Robyn answered the question, the caller noted that he went to Barnes and Noble bookstore and it seemed that every single book on the shelf had been printed and made in China! Robyn said she looks at the situation a little differently. We are supporting the change in China. The communist party runs China but it is no longer communist in anything but name and China is transforming from a communist to a capitalistic economic system. It’s about half-way there toward a fully capitalistic system. That
said, China does not have a free press, it does not have fully free markets and there are still serious problems in the human rights area and that has been a much slower part of change.
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Caller: What kind of religious freedom is there in China? Robyn said China does not respect religious freedom. You saw the huge reaction in China when President Bush honored the Dalai Lama. There has been a little movement in recent years, where China is more tolerant of churches, even Catholicism growing in the country; however, that change is very slow. China's philosophy toward religion has resulted in abuse toward its own citizens.

EC: Some interesting points in this interview. You can't ignore China Or India and there are investment opportunities in these countries. You Can find more about the book, "The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us"………………….."__David Korn.
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