According to some preliminary estimates (link), China’s trade balance is on the course for a significant surplus this year. IMF’s annual forecast of current account balance predicted China’s trade surplus at $334 billion in 2010 or roughly 6.2 percent of China’s GDP. The IMF’s medium-term forecast suggests a growing trade surplus by 2015 when the surplus is estimated at a little more than 8 percent of GDP.
Recently, Dani Rodrik questioned (link) the persistence of China’s mercantilism based on persistently low exchange rate. The partial fixation of the exchange rate then stimulates export-led growth model and, consequently, results in a large trade surplus which translates into foreign exchange reserves, thus enabling China’s central bank to foster exchange rate intervention to defended the targeted yuan exchange rate against the U.S dollar. The implications of China’s growth model extend beyond the scope of effects on country’s economic growth, investment and current account balance. China’s export-led growth model has tremendously affected the macroeconomic performance of developing nations. The exports of developing nations in the European, Japanese and U.S markets basically substitute, not complement, China’s exports to the markets of advanced countries. The persistent lack of the appreciation of renmimbi thus forced the economic policymakers of other developing nations to either adopt the same model of exchange rate intervention or lose the export share in developing countries. This intuition is underlined by the theoretical and empirical support.
In 2007, Hausmann, Hwang and Rodrik demonstated (link) that the pattern of specialization by developing countries predicts the subsequent economic growth, suggesting that the share of exports in advanced countries is highly positively correlated with the rates of economic growth. If China shifted the main source of economic growth from export-led model to domestic consumption, the renmimbi would have to appreciate considerably. Contrary to the assertion that China’s exchange rate undervaluation hampers the economic growth, industrialization and development prospects of developing nations, the OECD recently stated that developing countries would be hurt significantly if the renmimbi exchange rate were allowed to appreciate. There is also an empirical support for the particular assertion. The OECD recently estimated (link) that, if China’s output grew by 1 percentage point, the output of developing countries would decrease by 0.3 percentage point.
The empirics supports the argument I mentioned earlier – China’s exchange rate misalignment inevitably hinders the growth prospects and industrialization of developing countries. The essential question in the course of economic development is what is the best model of growth for developing countries to boost industrialization and development frontiers.
One possibility is the so called surplus model. Historically, growth models of low-income countries were primarily based on exporting natural resources to the rest of the world. Countries such as oil-rich gulf states, Botswana and Argentina became wealthy. Such growth model heavily depends on export demand in other countries. The most notable failure of this growth model is that it doesn’t encourage the diversification of economic activity. Thus, countries such as Libya have sustained relatively high levels of GDP but, at the same time, rather depressing domestic indicators. For instance, Libya’s GDP per capita is at almost the same level as Chile’s GDP per capita, but Libya’s unemployment rate is 30 percent – almost three times the average unemployment rate in countries with the same level of GDP per capita. When foreign demand deteriorates, these countries experience the Dutch disease – an overheating economic activity and overvalued exchange rates that discourage investment, entrepreneurship and typically result in higher unemployment rates.
Industrialization and economic development mostly depend on domestic structural change based on the adopting the institutions of macroeconomic stabilization and the rule of law. China’s exchange rate policy of renmimbi undervaluation is a failed temporary growth model that is set on the unsustainable course. Without shifting the major engine of growth from export-boosting exchange rate undervaluation to consumption-based growth, Chinese economy will no longer be able to sustain high productivity growth rates. Letting the renmimbi appreciate by free floating could significantly boost the potential for institutional change in China and other developing nations. Therefore, the systemic abuse of macroeconomic policy by exchange rate undervaluation would no longer be feasible and the costs of failed exchange rate regime for developing countries would diminish substantially.
The top selling Indian newspapers according to Amazon’s kindle subscriptions.
India’s courts may be in a slow process of reshaping India into a liberal democracy. Here is a Supreme Court ruling which blocks the Maharasthra government from interfering with the rights of a citizen to read a certain book. Sadly, it was done on a technicality.
Manish Sabharwal in the Financial Express on an important new initiative of the Ministry of Labour.Eric Bellman in the Wall Street Journal on the rise of Madras in automobile manufacturing. There is much strength there in electronics manufacturing also.
Dhiraj Nayyar in the Indian Express on the interfaces between mobile telephony and banking. [also see].
Kerala is Number 1 by Mahesh Vyas in the Business Standard.
On the difficulties of ULIPs and the recent ordinance, see Dhirendra Kumar in the Financial Express.
A story by Steve Lohr and John Markoff in the New York Times suggests that low end outsourcing to India could be under attack from new technology.
B. S. Raghavan in the Hindu Business Line on inflation targeting at RBI.
Hindustan Times and Mint have built an interesting new web page : The Indian innovation revolution.
We in India are very convinced that it is good to have a world where every single individual is numbered and trackable. But there are many nice things about anonymity and the creation of anonymous personas. See this story of Why, a person who did some amazing things anonymously, and then shut down this life when it looked like his anonymity was under threat. The idea of being able to create and live multiple anonymous invented personas has long been a meme in the hackish community – e.g. see True names by Vernor Vinge.
An interesting interview by Samir Sachdeva with Nandan Nilekani in Governance NOW magazine.
As I read Lose a general, win a war by Thomas E. Ricks in the New York Times, I was struck by this remarkable flexibility of labour contracts, which must work wonders for shaping incentives correctly.
Tarun Ramadorai on empirical analysis of the efforts at banning short selling of recent years.
David Friedman has released a free pdf of the 2nd edition of his important book The machinery of freedom. Hmm, that’s a good strategy: authors should open source edition $n$ when they start on edition $n+1$. Also see: a surge in interest in Friedrich von Hayek’s The road to serfdom.
Ruuel Marc Gerecht has some interesting ideas in the New York Times on the use of information technology to assist the resistance in Iran. I wonder if similar ideas can be deployed on the problems of China as well.
Tom Wright has an article in the Wall Street Journal about Zeeshan-ul-hassan Usmani, a Pakistani scientist working on explosions and suicide bombings. Also see Pervez Hoodbhoy on Pakistan’s existential problems.
Calzolari, Levi, Navaretti, Pozzolo, writing on voxEU, show that multinational banks were a source of stability in the crisis. Also see Internal capital markets and lending by multinational bank subsidiaries by de Haas and van Lelyveld, in the Journal of Financial Intermediation.
Ila Patnaik on the Chinese exchange rate regime and its implications for India.
Inflation targeting turns 20 by Scott Roger, in Finance & Development, March 2010.
Edward Glaeser reviews a book by Joel Mokyr on what made the industrial revolution. It makes you think about the nascent capitalism that we see in India.
Someone tried to make the point that the making the Yuan more flexible was already “priced in”; well it might be of course, but so far markets are bathing in serious risk on mode. Copper futures up some 4.5%, AUD/USD at 0.88ish and I could go on and on …
Enjoy it while it lasts …
Asia shares rose the most in almost seven months, U.S. and European stock index futures climbed and commodities advanced after China signaled it will relax the yuan’s fixed rate to the dollar. Treasuries fell.
The MSCI Asia Pacific Index rallied 2.8 percent to a six- week high of 119.42 at 3:15 p.m. in Tokyo. Futures for the Standard & Poor’s 500 Stock Index climbed 1.7 percent and those for the Euro Stoxx 50 added 1.6 percent. Oil increased 2 percent to $78.77 a barrel and copper jumped 4.3 percent. The yuan appreciated the most in 20 months versus the dollar. U.S. Treasury 10-year notes fell for a second day. The People’s Bank of China said it will end a two-year currency peg adopted during the global financial crisis to protect exporters, in a sign policy makers see the world economy strengthening. Commodity and industrial companies lead gains in Asian stocks on optimism for increased sales in the world’s third-largest economy.
“It’s a vote of confidence in Asia and in risk appetite and a reduction in the dangers of a trade war,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “The currencies of Asian nations, which are close competitors with China on the trade front, should do well.” The MSCI Asia index climbed the most since Nov. 30. The Nikkei 225 Stock Average jumped 2.4 percent and the Hang Seng Index rallied 2.8 percent to lead all regional benchmarks. Australia’s S&P ASX/200 Index advanced 1.4 percent and South Korea’s Kospi Index gained 1.5 percent.
The rupee/dollar rate has gained in flexibility. In order to visualise what has changed, it’s useful to look at a graph of the time-series of weekly percentage changes, expressed in absolute terms. That is, a change of -3% or +3% is shown as a bar of height 3 in this graph:
The vertical blue lines show the dates of structure change in the exchange rate regime. These are taken from our recent paper The Exchange Rate Regime in Asia: From Crisis to Crisis, which is forthcoming in International Review of Economics and Finance, and is part of our work on measurement of the de facto exchange rate regime. As an aside, a recent article in The Economist about Asian currency flexibility talks about this in a larger context.
The vertical blue lines break the overall experience into six distinct periods: a first period of high flexibility, then the shift to a nearly fixed rate in April 1994, then the higher flexibility at the time of the Asian crisis followed by a return to very low flexibility, and then two moves of increasing flexibility.
These movements towards flexibility — and away from administered prices — require corresponding adjustments on the part of the economy. If firms are coddled with an administered price and thus think that currency risk does not exist, or if exporters are coddled with a distorted exchange rate, then this generates the wrong behaviour on their part. See Ila Patnaik in the Indian Express on learning to live with a genuinely market determined exchange rate. Also see T. B. Kapali, of the Shriram Group of Companies, in the Hindu Business Line arguing in favour of greater flexibility for corporations in hedging currency risk.
Here’s a brief reading list on the issue of China’s exchange rate and US manufacturing jobs:
Simon J. Evenett and Joseph Francois on whether Chinese currency revaluation will create net jobs for the US economy (link).
William R. Cline’s discussion of estimating the effect of renmimbi appreciation on American jobs (link).
Abdul Abiad, Daniel Leigh and Marco E. Terrones’s analysis of cost of reducing large current account surplus (link).
Paul Krugman’s discussion of Chinese exchange rate policy (link) (link).
Paul Krugman (link) and Greg Mankiw (link) analyze the costs and benefits of China’s exchange rate policy.
Many people believe that the exchange rate regime (i.e. the monetary policy regime) of each country is its own sovereign choice.
In the Great Depression, we saw the harmful effects of the exchange rate mercantalism that is feasible with fiat money. This was a key motivation for Keynes and others in their design of the post-war order. The IMF was supposed to be a multilateral body that would help bring pressure on countries to move towards good sense through `ruthless truth-telling’. This didn’t work out too well. The IMF got itself into a box where it would not say anything about exchange rate regimes. To some extent, by standing ready to help countries that got into a currency crisis, it has helped perpetuate exchange rate pegging.
For the present discussion, I want to emphasise the distinction between small countries who can pretty much do as they like as opposed to systemically important countries where actions have a significant impact upon the world economy at large. In this approach, the four interesting questions are:
- In the selfish maximisation of one country at a time, what is the optimal choice of monetary policy regime / exchange rate regime?
- What the mechanisms and empirical magnitudes through which the exchange rate regime choice of one country imposes externalities on others? I.e. what is the consequence of the Nash equilibrium?
- What is an ideal solution for the world, which combines optimality for the local economy with good system outcomes?
- What international institutional arrangements can help push the system towards the right solution?
On the first question, some people believe that exchange rate mercantalism is good for the country. You don’t find much of this amongst professional economists.. As Merton Miller said: If devaluations could make a country rich, Argentina would be the richest country in the world. For a careful rebuttal of this loose thinking, done by one of the world’s top economists, see these discussant comments by Michael Woodford about a paper with this view by Dani Rodrik. As Andrew Rose said in a discussant comments at the Neemrana conference about a similar paper by Surjit Bhalla: This is either a home run or it’s totally wrong.
I feel that exporting is great for growth, but only when this exporting involves genuinely facing the market test of the global market. If a country exports based on subsidies of some sort – which I term `fake exports’ - then the gains in productivity and capability do not come about (link, link). My sense is that in China also, intellectuals no longer buy the `distort everything for exports’ idea.
As with every other export-subsidy or protectionist scheme, this has more takers amongst non-economists than amongst economists. It’s slow hard work, banging these down over and over.
On the second question, see Paul Krugman: link, link.
On the third question, I have a comment on `global imbalances’. Some people see big numbers for current account surpluses/deficits as being intrinsically flawed. I look upon them as being the success of globalisation, as a repudiation of the Feldstein/Horioka problem. It is in an autarkic world that you see Feldstein/Horioka problems, where capital flows are not large. If we are to get beyond the Lucas paradox, and get back to the massive `development’ capital flows of the First Globalisation, it’s going to require large sustained BOP surpluses in some countries and deficits in others.
As an example, the best deal for ageing OECD is to buy securities in young countries like India today, thus spurring their growth today. Over the next 50 years, these securities would yield a flow of widgets back and thus support consumption of their elderly.
Hence, I would say the question is: How can the world be made safe for large BOP surpluses/deficits? This is a more interesting and important problem, instead of saying to ourselves: How can the world eliminate large BOP surpluses/deficits.
It is indeed an old adage that while goods things are to be preferred over bad things it is possible to get too much of the former. Looking at recent comments from the governor of the Reserve Bank of Australia it is not difficult to imagine how these, albeit old and worn, pearls of wisdom may well have inspired Mr. Stevens in his effort to tiptoe the tightrope between signalling the intention to raise rates into an expected economic recovery on the one side and trying to prevent the Aussie shoot of on helium into the sun with wings of wax on the other.
Australia’s central bank Governor Glenn Stevens signaled a surge in the nation’s currency to near parity with the U.S. dollar has given him scope to slow the pace of future interest-rate increases.
Stevens, who yesterday became the first central banker in the world to raise borrowing costs twice in 2009, said the 28 percent gain in the currency this year may hurt exports and cool inflation, allowing him to “gradually” raise borrowing costs. Just last month, he warned it may be “imprudent” to keep rates at “emergency levels.” The local currency and bond yields fell as traders slashed bets on another quarter-point boost next month, after Stevens raised the overnight cash rate target to 3.5 percent from 3.25 percent. Investors have been driving the Australian dollar toward parity with the greenback, betting China’s economic growth will boost exports from Australia, the biggest shipper of iron ore used in making steel.
Policy makers “are probably glad for the parity talk as it reduces the amount of work they need to do with monetary policy,” said Matthew Johnson, an interest-rate strategist at UBS AG in Sydney. “A December move is a 50-50 proposition.” Traders are betting there is a 50 percent chance Stevens will increase the key rate by another quarter point on Dec. 1, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:22 p.m. today. Prior to Stevens’s comments, they had a 96 percent bet on such a gain.
Mr. Stevens’ comments follows in the heels of the recent push by part of the Aussie towards parity with the US dollar reflected primarily in the fact that the RBA has already raised twice in 2009 (from 3.00 to 3.5%) as well as a growing risk sentiment which is a fundamental prerequistie, in the current market, for observing investors react to (growing) yield differences. In so many words, this is all about carry trade and more specifically about the fact that in a world where the G3 and others are still fiddling with quasi- or outright QE it takes a brave sould to initiate a hiking process since it will mean an immediate reaction in the currency market. This is especially the case when the liquidity anchor effectively constitutes the US and thus; while the US pump priming keeps a floor under risky assets and volatility at low levels it becomes a veritable turkey shoot to gun for those currencies whose central banks are on the hike (see more here).
Following Mr. Stevens’ comments, the Aussie did lose a bit of its steam even if many currency punters still see it racing towards parity over the course of the coming year.
For example David Forrester who is currency economist at Barclays Capital expects the Aussie to test the parity level in 2010, a call based on the idea that the RBA will have hiked rates to a full 5.5% by the end of next year. Needless to say, in a world where risky assets continue to fly and risk aversion is kept in check this will provide a juicy interest rate differential vis-a-vis the G3 and thus the carry trade flows (be they actual carry trades or simply spot market piggy backing) will be plentiful.
The question is of course; can you blame the RBA for wanting to raise rates?
As it turns out, not really and particularly not in light of global central banks’ new found focus on asset prices in setting the policy rate. You know, it was all Greenspan’s fault and all that jazz. Still, for those worried about a too rapid V-shaped recovery, Australian house prices seem to offer plenty of things to worry about.
From Q3-08 to Q1-09 the house price index (weighted for the 8 biggest cities) fell a modest 5.6%, a drop which has been decisively paired in Q2/Q3-09 with the index rising a cumulative 8%. This picture is repeated if we look at a general gauge for consumer spending in the form of a sector break down of retail sales.
Consequently, the annual as well as monthly flow of retail trade turnover never really went decisively into negative in the context of the financial crisis which has no doubt contributed to the fact that the RBA never really contemplated a move into ZIRP and QE.
What happens next then?
Well as I noted recently, the burden of rebalancing may be tough to carry for those economies who have central banks brave enough to raise interest rates. Ironically of course and if it is really asset prices you are worried about, the risk is naturally that you just end up sucking in liquidity as you which in itself defeats the purpose of the hiking campaign (see Edward’s recent piece on Norway for a Scandinavian perspective on this). Naturally, you can retort to Brazil like capital controls, but in a world where capital flows freely and where the global economies are largely interdependent, this is like trying to stop a freight train with a VW Polo. Also, allow me to finish with a small quibble of mine in relation to the sudden urge by part of central bankers to target asset prices. I mean, this is fine and all and for those who know a little bit about monetary policy this is not something completely new. The problem is merely that targeting asset prices may not only be counterproductive in a world where asymmetric liquidity conditions and carry flows are the norm, by targeting asset prices also entail targeting a price which is considerable more volatile than traditional prices (because I assume that forecasting long term asset prices is not as easy as many believe). In this way, a steady gaze at asset prices may also conflict with central banks’ general propensity to favor incremental and gradual moves.
Whether this is the case in Australia, only time will tell. Yet, from the lovely fjords of Oslo, to the beaches of Rio, and on to the Great Barrier Reef policy makers may soon learn that you can indeed get too much of a good thing.
The Australian dollar reaching for parity with the U.S. dollar, marked by the horizontal green line near the top of the black screen. So close. As the U.S. economy slowed during the fourth quarter of 2007 and the first quarter of 2008, everybody knew that Canada would, sooner or later, be dragged down along with it. The two economies are intimately entwined—around 80% of Canadian exports, both commodities and manufactured products, head due south, and their northern neighbor is a bigger market for U.S. goods than all 27 members of the Eurozone combined. With these two nations particularly sensitive to each other’s economic sneezes, when the Federal Reserve began chopping interest rates with an ax, the Bank of Canada stood right behind them and hewed their own rates by 33% between December 2007 and April 2008.
During that same period of time, however, the Reserve Bank of Australia was raising interest rates to battle surging inflation and contain the effects of a huge influx of capital from soaring commodities prices and a 20% increase in their terms of trade. Flooding in Queensland coke mines and steady demand in Japan, India, South Korea and Taiwan caused the price of coal, Australia’s top export, to triple this year as fresh Chinese demand made it a seller’s market. Negotiated prices of iron ore, their second most important export, nearly doubled, again with Chinese impetus, and there’s really no reason to mention what happened to the prices for Australia’s other commodity goods, such as gold, crude oil, beef and copper.
Asia and Australia
Although there were clear signs the economic slowdown in the U.S. and Canada was spreading to the UK, it seemed that it would make no mark on the Australian and Asian boom, which had seemingly “decoupled” from the Western hemisphere’s problems. The demand surge for commodities in Asia, led by the insatiable maw of that newest kid on the block—you know, the one hosting the Olympic games—turned Australia’s trade deficit into a surplus in June 2008 and looked set to keep it that way for a long time.
After all, the reasoning went, 68.7% of Australia’s exports went to nations in the Asia-Pacific Economic Cooperation and another 12.8% went to China. Only 7.3% of all Australia’s exports went to the U.S., and that share was falling anyways. So if it declined further, well, there would be another hungry nation ready to take up the slack.
This decoupling theory for Australia and Asia gained popularity among traders who liked the down-under markets. In the second quarter of 2008, while credit market losses sent depository and investment banks reeling in the U.S. and UK, the Australian dollar embarked on an unbroken nine-week climb against the greenback. It looked amazingly similar to the Canadian dollar’s 17% surge against the U.S. dollar in 2007 that took it to parity and beyond, and foreign exchange traders confidently predicted the same would happen for the Aussie.
But something funny happened on the way to parity.
That creeping economic malaise from the U.S., Canada and the UK spread to their immediate trading partners, including the Eurozone and Japan, and from there it spread further as that other economic theory—globalization—reasserted itself. It took months because the U.S. slowdown began in the housing market, generally a domestic-only sector (not counting imported building materials), but the erosion of discretionary funds ate away at U.S. imports while the weak greenback made U.S. exports more affordable overseas, shifting the balance of trade in ever-spreading ripples across the globe. Partly due to these ripples, gross domestic product for Japan and the Eurozone are both expected to be in red ink for the second quarter of 2008, a point passed by the U.S. in the fourth quarter of 2007.
With global demand starting to fall, commodity prices slid to follow, and with such a large percentage of the Australian economy dependent upon commodity exports, it followed suit. On July 15, the exchange rate between the Australian dollar and the greenback touched 0.9848, a penny and a half beneath parity. Then on August 5, the Reserve Bank of Australia reached for the ax and announced that soon it would need to cut interest rates, too, like almost every other central bank around the world. The Aussie fell off the table, decoupled no more.
In the modern small market world, one might say, no economy is an island—not even Australia.
Europe has long been a favored travel destination for American travelers. In spite of the dollar’s downward spiral, Americans continue to flock to Italy, the UK, Germany and a few other favorites. As the dollar passes the $1.56 mark against the euro (remember the days when they were essentially equal?), travel has been only slightly hindered for Americans.
In fact, in 2007, according to the U.S. Department of Commerce’s Office of Travel and Tourism Industries (OTTI), the number of Americans traveling abroad grew by 1% from 2006 to 2007, increasing for the fourth year in a row. However, the first quarter of 2008 could hint of change as the economy continues to weaken and the euro strengthens. Combined with higher fuel prices, and hence higher airline prices, travel to the Continent is starting to get quite expensive.
OTTI reports a .2% decline for American travelers to Europe in the first quarter of 2008, as compared to the same period last year. Interestingly, however, in a few areas where the dollar remains relatively strong, such as South Africa, Mexico and South America, travel has increased. Americans traveling to Central and South America have increased in numbers by over 6% from last year, Mexico is up more than 8% and visitors to Africa are up a whopping 47.9% over 2007.
Against All Odds
And while many Americans who choose to vacation abroad are still traveling, that trend is likely to drop off especially if the economy continues to limp along. The Air Transport Association has reported that jet fuel prices have increased a head-spinning 70% through July 3 in comparison to 2007.
The New York Times reports that airlines industry analysts expect cuts in flights by nearly 10% for the year. And what about those economic stimulus checks? The Y Partnership, a travel industry PR firm, in cooperation with the Travel Industry Association, found in a recent survey that one in six of those receiving a check would spend it on travel.
So where are Americans choosing to vacation? For luxury travelers, high-end hotels, African safaris and River cruises in Europe are still popular. But for the average traveler who cannot afford the currently expensive euro, destinations such as Central and South America are looking very good. Many, however, are also choosing to stay in the States. Travel + Leisure magazine’s latest issue may be the harbinger of travel trends to come. Typically aimed at an upscale market of travelers, the July 2008 issue is draped in red, white and blue, and the headline reads “50 Fabulous U.S. Travel Ideas.” The editor’s regular column acknowledges the precipitous drop of the dollar against the euro and offers ideas for meaningful travel within the 50 states.
Arthur Frommer, long known for his budget travel guides and magazine Arthur Frommer’s Budget Travel, presented with his daughter Pauline at the April 2008 Atlanta Travel Expo. Their topic was travel bargains. Among the top picks were China, Vietnam, Kenya and Panama in addition to the American system of National Parks.
Exploring less frequented areas can offer a more authentic view of culture as well as a more favorable cost. Panama, which had an iffy reputation for travelers back in the 1980’s Noriega years, has transformed itself into a country ripe for visitors, with both rainforest jungles and sparkling beaches. (Disclaimer: travelers to foreign countries should always check with the State Department before departing.) The Panama Canal, which was handed over to the Panamanians by the U.S. in 1999, has experienced its busiest year ever in 2007. Furthermore, even though Panama uses the Balboa as currency, U.S. dollars are widely accepted, dispensing with the whole issue of currency exchange. With a beer that can easily cost under $1 and a wide range of tropical activities, Panama is becoming a popular destination.
Africa is becoming popular as an alternative to Europe too. For visitors who stay in a standard tourist hotel, rooms can be had in South Africa for under $50 per night, according to solotravel.org which offers cost guides for a number of countries. This is in sharp contrast to France, where a mid-range hotel will easily run you over $100 per night. Travelers who enjoy going abroad can also find great deals in other areas around the globe – such as a tourist hotel in China for about $30 or less and $20 in Vietnam.