Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 8/18)

Editor’s Note: Liz Peek is a financial columnist.

Instead of focusing on yield spreads and oil futures this week, I have been totally caught up in the latest medals tallies. Along with hundreds of thousands of others from all over the world, I am in Beijing for the Olympics, witness to China’s emergence on the world stage. Never has a country thrown itself into the promotion and celebration of these contests as energetically as the Chinese; the results from their viewpoint have doubtless been worth every penny of the $40 billion they spent – and that’s just on the venues.

The tsunami of nationalistic pride rolling over this country is palpable. Some 840 million Chinese watched the opening ceremonies on TV, and the audience has only grown since then. Restaurants, hotels, and shops have set up large flat screens so diners won’t miss a moment of their athletes’ accomplishments. The government has dedicated three TV channels to coverage of the Games, or at least to those where the Chinese are victorious. I cannot possibly estimate how many hours of table tennis they have broadcast. If you’re interested in who won the beach volleyball or basketball, better wait for CNN.

The Chinese have pulled off an almost impossible makeover of Beijing. The city fairly glistens it is so clean; there is no spitting or littering, the skies are (almost) blue and the avenues are planted with thousands of flowers and trees that will hopefully survive the return of Beijing’s signature smog. The game sites are well organized, with thousands of guards and ushers guaranteeing order and security. The people working at the sites are unfailingly polite. They welcome you to the events even while patting you down in the security lines and thank you for coming. They are cheerful and tidy and eager to help. Nothing has been left to chance. 

At the gold-medal soccer match Saturday between Argentina and Nigeria, there were cheering sections for each nation at opposite ends of the "bird’s nest" stadium. Row upon row of people dressed in the contestants’ colors yelled and banged color-coordinated Styrofoam sticks, causing quite a ruckus. It was thrilling to think that such large groups of Argentine or Nigerian fans could have made the trek to Beijing to cheer on their teams. The reality was — these enthusiasts were Chinese. They had been dressed up for the occasion, and though inadequately coached in the subtleties of the game (they frequently cheered at mystifying times), they did their level best to act like Yankees fans. The organizers must have worried that there would not be enough team spirit, so they created some of their own. 

What has certainly not been left to chance is the outcome of the Games. The Chinese government decided to win more gold medals than anyone else, and they have done it. They calculated where their advantages lay, and focused on games and sports where they have historically been strong, or where others have had little interest. Of the 47 gold medals won by the Chinese as of yesterday, 20 have come from weightlifting, badminton, diving, and table tennis. Really – Chinese totally dominated women’s weight lifting. 

So what do we make of this newfangled China? It is clearly ambitious, strong, and succeeding beyond their dreams. And yet, they face huge challenges. Recently, the All-China Federation of Trade Unions announced that unions would in the future provide free legal aid for "farmers-turned-workers, employees in financial distress and those whose rights are seriously violated." This is in response to more than 400,000 labor disputes that arose last year; in the first quarter of this year the total was up 87%. 

Many of these stem from uneducated farmers migrating to the cities. A government report out this week forecast that by 2030 some 60% of the population or 900 million people will live in urban areas, up from 45%, or 600 million, last year. In other words, more than 10 million people over each of the next 20 years will stream into cities already struggling to create jobs and housing for their burgeoning populations.

This is not only an issue for China, but for the whole world. It has been calculated that the country needs to expand at 11% to 12% a year to provide jobs for this shifting population. In the last quarter the country grew only 10.1%, down from 11.9% for all of 2007. Export growth has declined, causing much of the slowdown. The government may well respond by halting the advance of the renminbi, which had been gaining ground steadily against the dollar, and which has suddenly stagnated. This would not be good for trade relations or for those countries like the U.S. still losing manufacturing jobs to China.

This pressing need for growth also means that fighting pollution may continue to be a secondary concern. Environmental officials are now suggesting that some of the measures adopted to improve the air quality in Beijing could be kept in place, so pleased are they with the result. Do they really expect the industrial companies that were required to shut down over a month ago to stay shuttered? 

China’s quest for gold will not end with the closing ceremonies tonight. The world will be competing with an aggressive China for the foreseeable future. Let us hope the contest remains as orderly and friendly as these Games have been.