IT Industry not Affected by Typhoon Morakot

More reports are floating in from the South of Taiwan of serious loss of life and damage to property. The BBC reports 'Hundreds lost' in Taiwan typhoon due to severe typhoon induced mudslides. Despite the massive loss of life and damage to property, Digitimes reports the IT industry has remained largely unaffected by the typhoon. Digitimes reports:

Taiwan's electronics industries appear to have seen limited affects from Typhoon Morakot which brought heavy rains over the weekend and caused seriously flooding in many areas in the southern and eastern parts of the island.

Many companies have already reported via filings with the Taiwan Stock Exchanged that their operations and businesses have seen little or no impact from Morakot.

Typhoons always are always dangerous and this one seems to be particularly dangerous. Hi Tech Taipei mourns with all Taiwanese people and with the families and friends of those lost and missing. Lets hope survivors can be found.

Digitimes: Taiwan IT industry not affected by typhoon flooding

Censorship in China

As much as the economy has changed in China, the political envionment has hardly changed at all. The government is as authoratarian as ever and continue to police internet sites, especially since a new set of political rabble rousers have started using the internet to spread their ideas. From the Financial Times:

China’s government has accused the country’s leading internet search engines and web portals, including Google, of threatening public morals by carrying pornographic and vulgar content.

While Beijing regularly launches web censorship campaigns, the new crackdown is the first in which the government has targeted heavyweight companies such as Google and Baidu, the local rival that leads the Chinese search market. During the last campaign about a year ago, the authorities listed only small and little-known websites as responsible for spreading unhealthy content.

The 19 internet sites cited by the government on Monday included Sina, Sohu, Tencent and NetEase, among the country’s biggest web portals and each run by overseas listed companies, and blog hosting websites and discussion forums such as Tianya.

The move comes as the political leadership faces a raft of challenges, many of them organised through the internet.

Government censors are currently busy blocking reporting and debate about Charter 08, an appeal for democratic reform which has attracted signatures from hundreds of prominent intellectuals. Other forms of dissent, such as the voicing of demands for compensation in China’s poisoned milk scandal, have also been organised through the internet.

Although the government has said this is an act against online pornography, I really believe they are flexing their muscles and showing how capable they can be when it comes to blocking content and holding people accountable for that content, especially with regard to Charter 08.

Financial Times: China cracks down on internet content

Comments on Back in the Saddle

In Back in the Saddle we note Chinese President Hu Jin Tao as saying China's competitive advantage is being eroded in the current economic climate. I have long argued on this blog that for China to remain competitive they have to be innovators and not copiers. Anyway, one of our regular blog readers Dr. Bob Vaas (my MBA supervisor) commented on Back in the Saddle via email and gave us permission to publish his thoughts which I thought are insightful. His comments are below:

The Chinese are in real trouble - the constant expansion and growth model the government relied on is already foundering, and having chucked out all Communist ideals a couple of decades ago, the Party has a major problem. The powerbase is being eroded rapidly - no basic faith other than wealth creation and higher living standards has been promoted, and these are dropping rapidly. I saw something in our paper here today reporting Chinese wages as now being only 45% of GDP cf 52% a year ago, so the average worker is going backwards, and as output slows ....... There were riots last month in various places, and these will heighten. I just hope the Party does not decide to channel frustrations into anti-foreigner and expansionist moves - against Tiwan and Japan, for example. If I were the Chinese I'd move inot Siberia, I think, although most Russians seem to think that their Far East is actually a Chinese country with Russian troops stabilising it !

In a later email Dr. Vaas observes:

The Party has painted itself into a corner - back in Mao's time there was a moral compass (distorted, abused and cynically manipulated) with espoused societal values that, I guess, harked back to Confucian times and the co-operation of the hutongs. Despite the immorality and gross corruption of Mao's regime there were values and standards, I thought, but good ole Deng threw those out a long time ago. You end up in an Enron position very quickly going down that route, and really the Party has embarked on a Ponzi promotion for the whole country. When this sort of scheme collapses, it does so very quickly, and civil unrest will not be far behind. If the Party promises just one thing - better individual wealth and living standards - as soon as it fails to deliver on this measure, it has no other goals or objectives which it can point to as counterbalances to the lack of cash today. Unlike African countries like Zimbabwe where a completely corrupt government can beggar the nation, but the individual can revert to subsistence farming as there are no very big city populations, China cannot rely on the masses heading back to the paddy fields as the city's masses were never there. An urban population the size of Shanghai's will not suddenly take up agriculture and feed themselves - especially if they have large monetary debts overhanging them.

So far, I have been very impressed by the Party's management of growth - they have maintained civil order in most areas, delivered inproved living standards for a large chunk of society, and avoided inflation and monetary and fiscal problems. Their investment in infrastructure is in stark contrast to Russia, where all the novel wealth has disappeared into the Kremlin and the oligarchs offshore accounts, and nothing has been invested at home. Not a new high speed railway line between St Petersburg and Moscow, even ! This was planned 15 years ago, work started about a decade ago, and was abandoned 5 years later - compare that to the Lhasa railway ! I know, the Lhasa railway is there to get the PLA into a hotspot quickly, but it is a mind blowing piece of infrastructural development.

Insightful food for thought! Many people refuse to see the underlying issues that are related to China's economy. Many of these issues have been covered in the press in a very small way but there is the potential for massive strife in China. A declining population will eventually put a dent in the growth of the economy and gender imbalances in the male/female ratio have the potetential to cause civil strife are just a few concerns. Since China is so firmly established in the global supply chain, any strife or disruptions in that economy have the potential to rapidly ripple accross the globe.

Sales Down Accross the Computer Industry

Yep, sales for computers and associated products are in decline. The following list is a smattering from some of yesterdays headlines:

• Nanya parent level September sales down 20.92% from a year earlier and down 16.87 pct from the previous month. -- Trading Markets
• "Advanced Semiconductor Engineering (ASE) has posted consolidated revenues of NT$8.32 billion (US$256.8 million) for September, down 5.3% on month and also down 15.1% on year" -- DigiTimes
• "Citigroup yesterday lowered its forecast for growth of global PC shipments this year to 13 percent from 15 percent on concerns of slowing demand amid global financial turmoil." -- Taipei Times
• "UMC, the world's No. 2 contract chip maker, said on Wednesday its September sales fell 23.6 percent from a year ago, declining for a fourth straight month, after a slowing global economy hurt technology demand." -- Reuters

Yep, the economy is hurting so it seems.