China population (iii) - the scar of Great Leap Forward

This is a graph of China's 1982, 2000, and projection on 2050.

It is from Feng and Mason study. "The Effect of China's One-Child Family Policy after 25 Years". The objective is to study the effect of population aging on China's productive population and retiree/dependents. The 3 graphs belows shows the profile of working population and supported people by age.
  • "reallocation to children" means the amount of production used to support children; similarly for elderly. (see pp19 of the research for legends and explanation)
  • AY is the average of age of production population (mean of the blue curve)
  • AC is the average of age of consumption population (mean of the pink curve)
  • You can see that AC moves from 28 (1982) to 33 (2000) to 44 (2005), and it overtook AY a few years before 2005. That means the dependent population shift from children into elderly.
China' population curve is not continuous. There is a deep (about 1/3 lower than an interpolation curve) crack from age 20-24 in the 1982 graph (which is the same as the crack for 38-42 in 2000 graph). This is due to the famine in 1959-1962, higher infant mortality and mainly lower birth rate (fertility) rate due to mal-nutrition and less willingness to reproduce. This is the scar left by Great Leap Forward. The birth+survival rate was 1/3 lower for people born during those 3-4 years. The "scar" will only fade away in around 2050, which coincidentally would be about time China steps into the rank of developed world, hopefully.

Update: The population profile (2000 curve) dips again at age=10-30 range (i.e. those born in 1970-1990, this time much wider and smoother. I am not sure if I have the full explanation. One possibility is the one-child policy started in early 1980s, the other is the secondary effect of the crack of 1959-1961, because there are comparatively less people to give brith to the next generation in 1980-1995. However, the secondary effect shoule be very small, i.e. 30%x3 years spread through 15-20 years means 5-6% lower than the interpolated line.


Panda economics, panda science and critical reading

Apple Daily Taiwan reported,

  • Chen Yumin, the Director of Taiwan Animal Society Research Association, said, “according to the research by US Fish and Wildlife Service from 1938 to 1988, 106 pandas have been bred through artificial insemination, only 32 survived for over 1 year.” Chen went on to “conclude”, “This shows that artificially inseminated panda does not work, and Taiwan should not accept panda from China mainland
  • Annual cost to keep a pair of panda is NT$18.68M, all the related research funds, education materials for the public and other expenses are included (estimated and budgeted by Taipei Zoo)
  • Agriculture Commission need to evaluate the feasibility and will deliver a decision by March 23 (note: reasons given include suitability of Taiwan weather and WWF compliance), adding all the bureaucracy the earliest the panda could arrive is around July and August.

Panda science (and pseudoscience)

Apple Daily is a rarity in Taiwan, in that its reports are usually unbiased. But I am not sure if its reporters are, or if they are capable to being a critical reader. In particular, I am amazed how Chen can call himself a scientist. Here is why

  • Anyone who uses data from 1938 (or even 1988) for artificial animal breeding must be totally ignorant of the development biological science in the past few decades, or maliciously manipulating the data.
  • Here are more recent statistics: “The Wolong center inaugurated in 1983 has welcomed 90 baby pandas born through artificial insemination, 77 of whom have survived…Major breakthroughs have been reported after the 1990s. Artificial fertilization gave birth to nine baby pandas in 2000, 12 in 2001, 10 in 2002 and 15 in 2003...Last year, China's 30 artificially-fertilized giant pandas produced 12 offspring but only nine survived… Artificial insemination gave birth to 25 baby pandas [in fall 2004], of which 21 have survived, a record number since China first took the challenge in the 1960s.
  • So the relevant survival rate, as #16 and #19, which are designated to go to Taiwan, were born in Wolong, is 77/90=86%. The survival rate for 2005 is 84%.
  • The pseudo-scientist Chen brought up something even more irrelevant, using the one-year survival rate, because both pandas (#16 and #19) are 1.5 year healthy now
The Business case

The ultimate question is: could the additional revenue brought to the zoo justify the incremental costs in keeping the panda? Here are some benchmarking:
  • "Zoo Atlanta received 708,700 visitors. Those numbers spiked to 1,037,200 in 2000, after the arrival of the pandas,” That is 46% hike in the first year. 329k additional visitor would generate $3.29M additional revenue if one assumes $10/visitor on average (2005 price is $17/$12). That is NT100M. This does not include additional sales in memorabia.
    • Atlanta has to donate $1M to get the panda for 1 year, while Taiwan does not have to pay at all
    • The increase in the following year should be smaller, but it should still be a major attraction for tourists
  • “The National Zoo's pandas, female Mei Xiang and male Tian Tian, went on display in January 2001. Before they arrived, National Zoo officials predicted that they would draw an additional 400,000 visitors a year to the free Smithsonian Institution park, and bring $1.2 million more in food, drink and souvenir sales…Sales of food, drink and souvenirs nearly doubled -- from $5.5 million in 2000 to $10.3 million in 2001” – Washington Post
  • Ching Mai Zoo in Thailand recorded triple admission number after loaning 2 pandas for 6 months, incremental revenue was over THB27M (NTD22M). It was claimed that the overall economic impact for the pandas on Ching Mai was about THB 725M (NTD580M), including tourist expenses such as hotel and meal.
  • A recent study commissioned by the Chinese government found that a properly managed ecotourism program in the Wolong Panda Reserve could generate between $29 and $42 million per year.” - Ecotourism: Panda's Paladin or Bane?
How does this apply to Taipei Zoo?
  • In 2000, Taipei Zoo’s admission is 5.7M, another estimate has it at 3.5M. The admission price is very lower in Taipei ($2 adult, $1 child). On average, the annual admission revenue is $5.25M. A 46% increase would mean $2.4M or NT$77M (total over 5M attendence);
  • alternatively, a NT$10 increase in ticket (supported by the new pandas) would mean NT$35M net increase in revenue, or NT$17M in net profit, if one assume the same volume and cost of NTD18M
  • It was also estimated that, if among the visitors 1M people purchase memorabia at the average of NT$100 per person, then 10% loyalty would produce additional NT$10M for Taipei Zoo (This business plan is quite amusing, it assumed $1M donation to Panda Fund in China and is still profitable. However, the plan is quite aggressive and it even contemplates selling “Panda Sex Video”)
Panda bureaucracy/bickering

As for what Taiwan’s Agriculture Commission need to evaluate, see this from US FWS for reference. I do not see the excuses panda-politicizers provide. One should also note that the weather in HK is just as humid and hot as that in Taiwan (San Diego is dry and hot), and the 2 pandas had been living happily for over 6 years in Ocean Park.

Conclusion: it is not difficult to see the economics works very well, especially if China is not asking for donation to the Panda Fund (unlike the case for the US zoos). It also shows that all the excuses rejecting the pandas are very lame ones.


Durian and needle in a pillow: critical mind needed to read distorted reporting

When I read anything from China, or from Falungong on the other end, I always remind myself the media is tightly controlled and I need to be critical of everything they report. Supposedly you can be more trustful to western "free" media.

Not so. Recently I found it hurts more if I was present a down pillow with a few needle than a durian. People's Daily is the durian which I know how to handle, simple avoid touching it. Epoch Times is even easily to read, just negate every sentence and you got the truth. But the free western media are apparently harmless pillows which could pinch you to bleed if you are careless.

In a recent discussion on sinosplice and eswn, a comment by a jim on Roland Soong gave me some thought
  • "However, he goes out of his way to go against the Western conventional wisdom on China, which makes him overly sympathetic to the government at times. I understand this tendancy given the state of conventional wisdom on China, but I think ESWN should guard against swining too far the other way."
To me, Roland got my respect precisely because he does not take the "Western conventional wisdom" wholesale. If ESWN follows the conventional "wisdom", not just on China, but on anything, I believe its hit rate would drop by 90%+. And I am among the 90%.

Jim was careful in using a rather neutral word "conventional wisdom". I think he is aware of the pitfalls in such 'wisdom'. I know China well enough that even without Roland I am able to sort out the needles quickly. But the recent report on the Ukraine-Russia gas dispute almost got me needled. It took me quite some while to figure out the truth and I lamented that I couldn't find something similar to Roland's site about Ukraine. I wish there is a site similar to Roland's, which does not follow the "western conventional wisdom", for every country/area.


Here is my problem with the report on Ukraine. There are 18,700 (as of now) reports if you google the news on "ukraine russia gas price cubic meter". 99+% of them contain lots of hidden needles. I will take NYT as an example (see earlier posts for the business issues), but you can see the same stupidity and biase in almost all other papers.
  • Most reports failed to mention what the market rate is, but they tried to compare Ukraine's rate to that paid by Putin's crony Belarus ($47/tcm). As it turns out, even the $230 rate is way below market rate. No one mentioned that $230/tcm is equivalent to $6/MMBtu, and NYMEX is trading at a price higher than $10/tcm. It is Russia's supply price to Belarus which should be questioned, not its asking price to Ukraine.
  • "President Vladimir V. Putin of Russia paid a stiff political price as his country's natural gas company, Gazprom, backpedaled on ultimatums of a gas embargo against Ukraine under pressure from European leaders who questioned the Kremlin's reliability as an energy provider." - Why is Kremlin not reliable as an energy provider? if you refuse to pay you got you electricity cut off. If NYT is referring to the EU, again, blame Ukraine for stealing the gas, not Russia.
  • "Whatever extra revenue Gazprom might earn through the deal may be offset in the long term by a huge dose of skepticism over its expansion plans in Western Europe created by the failed Russian gas embargo......Even Germany, usually a faithful Russian ally and Russia's largest gas customer, wondered aloud whether Russia could be trusted. " - Russia restored supply even though Ukraine continue to free-ride, in order to maintain the confidence of EU. If anything, you could be less skeptical of Russia to fulfill its commitment to its contracts
  • see the comments field here for different sides of views
I personally believe Russia is a big bully and aggressor and it has been so since 1500 and not changed much today. I think the orange revolution is great for Ukraine. But I cannot stand the hypocrisy and biase of these reports. The "convention wisdom" is a plague. It takes a lot time and research to find out the needle in the pillow/haystack in such "wisdom", or the sand grain in your bowl of rice. It would pierce your head or break your teeth if you are careless.


In memory of Shiro Azuma

Shiro Azuma passed away.

China expressed condolences.

The Japanese right wings has been demonizing China, and the Chinese people for not letting go of the history. They maintain that there is nothing they could do to "apppease" China.

They are wrong, most Chinese are forgiving people, the influence of confusciusm and buddhism is still very strong despite the cultural revolution. It is not that difficult for the Japanese to win friendship from the Chinese. Azuma was a soldier in Nanjing in 1937, beheaded 4 Chinese farmers in Nanjing in one day, and committed his share of atrocity during his 4 year service in the imperial army. Yet he is highly respected among all Chinese.

Azuma reminds the Chinese that there are many peace loving Japanese people, who are friends of the Chinese. The best way for Chinese people to remember Mr Azuma is to remind themselves that there are many kind souls in Japan like Mr Azuma; and that any violence targeting Japanese people or business may hurt people like Mr Azuma by mistake. Mr Azuma had spent his last 20 years to forge peace between the 2 great Asian nations, let's not let the right wing in Japan or China ruin his efforts.

Related question: will Mr Azuma be honoured in Yasukuni?


Taiwan's economic freedom

According to the Heritage Foundation, the economic freedom of Taiwan drops from #26 last year to #37 this year.

Meanwhile, HK stayed at #1, 8 years after reverted to PRC rule. China still ranked low, but its score has improved steadily (note high value in score means unfree).

Taiwan's score has been in the decline since Chen Shui Bian started to rule the island (score=2.03 in 2000). The only year of improvement was right before the 2004 election (improved slightly from 2.48 to 2.34). It seems safe to expect the decline until 2008 election.

In the 10 categories of scoring, Taiwan scored worse at
  • Fiscal burden
  • Gov't intervention
  • Regulation
I would not blame CSB too much on fiscal burden, except that he still plans on aggressive spending on arms purchase (but he did not succeed).

To appreciate the government intervention and regulation via means of "active management" in Taiwan, there are two examples here
Sounds like a very strategic advice from Ho. The only problem is, Ho is a government bureacrat. She is not the strategic VP of PSC and knows nothing about the business environment where PSC operates. The minister of economic is responsible for hundres of industries, other than semiconductor. In a free market the business should determine whether an investment will be profitable, because it is putting its own money on the table.

Imagine John Snow telling Microsoft what its strategy should be. This is why Taiwan's economy is not free, and how its economic has suffered, from the irrational management of CSB.

How the Ukraine Russia (RosUkrEnergo) gas deal work

The new Ukraine-Russia gas deal will involve a new company RosUkrEnergo, (background here and here) which will
  • import gas from Russia at $230, from Turkmenstan and Kazakhstan at $x (prce for Turkmenistan is set at $65, probably higher for Kazakhstan), annual volumes are 17 and 40 bn cm respectively
  • own the interests to the pipeline in Ukraine, i.e. earning $1.6/tcm/100km for the 130bn cm gas passing its border
  • sell gas to Ukraine at $95 at current price structure, but adjustable as its cost/revenue position changes
I think the formula works roughly at below (where I assumed that x=70, and made some assumption about the length of the gas pipe. The numbers might be slightly different in the deal)

_________________ Russia __Asia _______Total
Volume (bn cm)_______ 17 ____ 40 ________ 57
Price/tcm___________ 230 ___ 70
Total cost ($M)______ 3910 _ 2800 ________ 6710
Avg Price ($/tcm) ______________________ 118

________________ Ukr pipe ___ Rus pipe __ Total
Volume (bn cm)______ -130 ________ 40
Distance (km)________ 800 ________ 500
Price ($/100km/tcm) __ 1.6 _______ 1.6
Total cost ($M) _____ -1664 _______ 320 ____ 5366
Avg Price ($/tcm)________________________ 94

This is a reasonale deal, satisfying the interests of both sides. More importantly, now RosUkrEnergo secures control of Ukraine's pipelines and hence supply to the EU.

Ukraine, now paying a higher price for gas, has more incentive to change its wasteful habit. It will help to curb demand and hence ease some pressure on energy price in the world. As a sidenote, if China would deregulate its price control on oil and gas, we should also see a decrease in demand and hence price in world market.


Ukraine gas price, industry unit convention, and the core issues

In a nutshell
  • Ukraine got dirt cheap gas from Russia
  • Russia wanted to raise price, and the asking price is reasonable
  • Ukraine controls the pipeline from Russia to EU, Russia is obligated by contract to deliver gas to EU's door, so it is hijacked by Ukraine now (illegally)
  • Russia could sue Ukraine, but its negotiation position could only improve if it has alternative to fulfill its contact obligation to EU
  • Most western media are sympathetic and biased toward the Ukrainian view. All I got were incomplete or biased info. As a result, it took me a while to figure this out. Below is how I got this.

I keyed in "Ukraine Russia gas price" dispute, I got 2890 entries (NYT, BBC, CNN)
  • "The dispute centers on Gazprom's politically influenced pricing system. Ukraine, through a deal arranged under former President Leonid D. Kuchma, has been paying $50 for 1,000 cubic meters of gas, reflecting Russia's practice of providing discounted energy to former Soviet nations still in the Kremlin's orbit...Gazprom, has proposed charging $220 to $230 for 1,000 cubic meters, in line with prices in Europe. Mr. Putin has offered a $3.6 billion loan to Ukraine to help cover the costs, a gesture variously seen as pragmatic or patronizing." - NYT

  • "Ukraine, which currently pays $50 per 1,000 cubic metre, has said it is prepared to phase in world prices gradually and can only raise its payment to about $80 for now." - BBC
Yes, I know there is a dispute on prices. $50 per 1000m3 is too low, $230 per 1000m3 may be too high. But what is the fair market price? None of the report tells us what the market price is.

I googled a bit, I was left frustrated. All I got is the market price in MMBTU
  • The most recent price Dec average traded on NYMEX and Henry Hub is $13.418/MMBtu, Nov/05 average was $11.649 (oilenergy.com)
  • A chart here show similar price
This does not tell me whether Russia has offered Ukraine a fair deal, unless I figure out how many cubic meter a MMBtu is equivalent to. I need convert a non-metric energy unit to its (equivalent) metric volume unit.
  1. 1 MMBtu = 1.054615 Gigajoules
  2. 1 GJ=26.8 m3
So $13.4/MMBtu is $13.4x(1000/26.8/1.053615)=$474 per 1000 cubic meters.

Because it is difficult to transport gas, the price could vary by as much as 10-25% for different location. For simplicity I would assume Ukraine should get 20% discount (suggestion welcome) due to its proximity so the "fair market price" should be $379.

Ukraine also insists that it should get a 15% cut for passing the gas through its border to other countries that Russia export to. If we assume for every cubic meter Ukraine buys there is one cubic meter Ukraine helps transport via its pipelines, the fair price should then be $322.

Russia's asking price is $220-230 per 1000 cubic meter. From this calculation it seems to be a very reasonable deal.

Update (Jan2): according to BBC,
  • Ukraine: US$230
  • Belarus: US$47
  • Armenia and Georgia: US$110
  • Lithuania, Latvia, Estonia: US$120-125 (NYT)
  • Moldova: US$160 (NYT)
  • Romania: US$280
  • Average EU charge: US$240; US$255 according to timesonline (this number is dubious, I expect EU price to be higher than Romania's, due to distance and affordability. According to Oil & Gas Journal, "in the 1970s, the United States had established an embargo on certain supplies to the Soviet Union after the Soviet invasion of Afghanistan. However, several European countries anxious to receive gas supplies from the USSR agreed to supply pipes and compressor stations to complete the needed pipeline infrastructure. Those European contractors - mostly from West Germany, Italy, and France - were to be compensated by supplies of Soviet ga.")
I suppose the discrepancy of the Romania/EU price and the NYMEX/Henry Hub prices is probably because the price lock-in signed a couple years ago. With the building of undersea piplelines to supply Germany, and a new pipeline connecting to China, Russia will have more customers and will be able to command a higher price. More background info see here.

Update Jan 3 : Russia re-opened supply to Ukraine, because by contract it has the responsibility to deliver gas up to the former USSR border (point B in the map below, source). EU would sue Russia, not Ukraine, if it does not get its gas. So Ukraine succeeded in hijacking the gas pipes in its border. Ukraine's position is strong, until Russia can use the Poland/Belarus branch to bypass Ukraine. Meanwhile, Russia can sue Ukraine for stealing the gas, but that still leaves Russia in an awkward situation.

The map below is from NYT, if ther is indeed an artery running from A to B. Russia has a way to bypass Ukraine to Slovakia. Romania and Moldova would still be cut off, but EU would be reconnected in a couple weeks through some reconfiguration of the pipes.

When one reads this piece from Times and this from NYT. The NYT essay looks like the worst WSJ editorial and full of biased views. One has to wonder, perhaps Oxbridge are still much better institutes than Harvard-Yale?

Update Jan 4: Ukraine gets a good deal at $95/tcm effectively ($230 - cost of transport at $1.6/100km/1tcm).
  • It is significantly lower than any other country except Belarus. This shows how much clout Ukraine has due to its geographic location.
  • This also sort of dispel the myth of Russia bullying Ukraine (because a reasonable deal was reached).
  • The deal will be valid 5 year, after that Russia will have alternative route and new contracts from Russia will only guarantee to its own border.
Update : Details of the deal
  • "Ukraine will pay 230 usd per 1,000 cu m over five years, while the transit price for Russia gas through Ukraine to European customers will rise to 1.6 usd per 1,000 cu m per 100 km of pipeline from the existing 1.09 usd...[Ukraine said it] will end up paying 95 usd per 1,000 cu m for a combination of 'Russian and Asian gas' "
  • A simple calculation: for every cubic meter Ukraine consume, it delivers 14 cubic meter to EU, if one assumes the pipe artery is 700 km long. ((230-95)/1.6/7). However, the actually situation may be complicated because $95 effective price includes "Asian" gas from Turkmenstan/etc.



Map: world energy supply and demand

This is a very clear map showing the world energy supply and demand, (source: Rice University report)
  • Demand: the light up area satellite photo is used
  • Supply: the proven reserve of gas (and oil, which are highly correlated)



Linguistic map of Taiwan aborigine and Biao Chifang's proposal

This is an ethnolinguistic map of Taiwan 500 years+ ago, which also represents the footprint of where the aborigines live today.

Han migration started in 11th century, a barrack was built in Penghu. Since 15th and 16th century there was large scale Han migration (mainly of the Hoklo and Hakka branch). The aborigines were pushed to southwest. The migration before and after that is shown in the map below. (a high resolution map of 3.5MB is here)

The cutest politician in the beautiful island of Taiwan, Tsai Biao Chifang, has put forward an innovative proposal in the Legislative Yuan, to attack and take over the mainland (反攻大陸).
If you have examined the maps above map careful enough, you would see that there is only one small island near Lan Yu, which is already under Taiwan control. Further south there is a group of islands called the Batans, currently belong to the Philippines. The people there belong to Yami group of Lan Yu.
Apparently DPP has recently become more "aggressive", after starting to build an airport in the Spratly (Taiping), now it is contemplating waging war with the Philippines. My advice, there is this uninhabited island they should take, I am sure PRC would give them full support if they do.