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Monthly Archives: October 2011

A new desalination plant outside of Tianjin is attracting attention because of the new government support for the project.

There is but one wrinkle in the $4 billion plant: The desalted water costs twice as much to produce as it sells for. Nevertheless, the owner of the complex, a government-run conglomerate called S.D.I.C., is moving to quadruple the plant’s desalinating capacity, making it China’s largest.

“Someone has to lose money,” Guo Qigang, the plant’s general manager, said in a recent interview. “We’re a state-owned corporation, and it’s our social responsibility.”

In some places, this would be economic lunacy. In China, it is economic strategy.

While domestic demand for fresh water is expected to grow, this new industry may also provide fresh water for export. The government’s support is being compared to its support of the solar-panel and wind turbine industries.

“There are large-scale desalination projects centralized all up and down the east coast of China,” ERI’s chief executive officer, Thomas S. Rooney Jr., said in an interview. “Our company has the most advanced technology in the entire desalination industry. And one of the beautiful things about China is that they like to adopt the most advanced technologies.”

“You can either fight them or join them, and our philosophy is that China likely is going to be the next big desalination market,” he added.

I am not sure this is a valid responsibility of government, to subsidize new technologies that do not promise profit. Maybe they do see it as potentially profitable in the future, or perhaps as a needed resource for Chinese society.

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Here is an interesting observation–of how Chinese banking works with authoritarian oversight from the government. It may be a model for future reforms in the west, given the problems with banks in the US and Europe these days.

Today, Jiang Jianqing has a somewhat bigger job: running the world’s biggest bank, Industrial and Commercial Bank of China.

But he does the work for an annual salary that might make a hardened socialist nod with approval. He earned $150,000 in 2010, a mere 1.5 percent of Bank of America Corp CEO Brian Moynihan’s estimated $10 million pay last year, and half again smaller than the $20 million Jamie Dimon was paid for running JP Morgan.

One observation is that his salary is much less than in western banks, but there is also the observation that his responsibilities are judged by party members rather shareholders.

As Jiang’s example shows, China’s top bank bosses are a different breed to their Western counterparts. Beneath their coiffured hair and tailored suits, the likes of CCB Chairman Guo Shuqing and ICBC’s Jiang are first and foremost Communist Party members appointed to their jobs by the government.

China’s biggest financial institutions fall under the supervision of the Communist Party, so the bank heads also sit on the party’s Central Committee that is ultimately headed by the country’s President Hu Jintao.

Maybe there is something to be said for banks working for the good of government economic policy. Perhaps the days of a free market in the banking sector are outdated.

Protests in New York are focusing on some political problems that are thought to be responsible–among other things–for greater income disparities in the US.

In its declaration, the three-week-old protest group comes out four-square against foreclosures, executive bonuses, workplace discrimination, politicians beholden to lobbyists, monopoly agriculture, and the sale of personal privacy data. It decries everything from colonialism to “faulty bookkeeping.”

Referred to as Occupy Wall Street, these protests seem long overdue and–unlike some other political movements, like the Tea Party–these focus on issues that really matter both to the economy and a political system that many see as not being representative of anyone but the super-rich.