A Perspective on China

加大技术改造力度, 全面提升产品质量
jiā dà jì shù gǎi zào lì dù, quán miàn tí shēng chǎn pǐn zhì liàngIncrease the strength of technological innovation;
Improve overall product quality [in China] – WEN Jia-Bao – Chinese Premier 2010

I Love my Country

I am British. I love my Country. I detest most British politicians. I hated the STATE of my Country so much I voted with my feet and went to China in 2005. Now I have an 80 person RP company in Zhongshan which I started with less than USD 10,000. I hope one day to go back and help fix the UK.I am so upset about Britain’s decrepit state I wanted to find out why and what could be done to fix the systemic problems. Maybe my journey to China has taught me a few lessons.I recently did a balance sheet calculation for the major countries of the World. I wanted to create a meaningful measure for a country. The reliance on GDP as an indicator of wealth creation is ridiculous. No sane businessman would measure his business based on sales alone.  Sales is vanity; profit is sanity.

Who’s Broke?

I approached the calculation in the same way as I would calculate the balance sheet of a company. These were my rough guesstimates:The UK is bankrupt having a balance sheet of approximately minus USD 0.8 trillion. The UK is bankrupt because of complete systemic collapse.China approximately + USD 11 trillion [increasing fast]
Germany approximately + USD 6.5 trillion [increasing]
USA approx + USD 27 trillion (ignoring the CDS fiasco that could burst at any time)[The USA’s value is decreasing mainly due to the trade deficit/reduction of domestic manufacturing]The UK is bankrupt along with Portugal, Iceland, Greece, Spain, Ireland and Italy. Why so many bankrupt countries?

How to Increase the Wealth of Nations

To increase the worth of your balance sheet as a company you have to make a profit and pay down net debt. In National terms that is called a trade surplus and paying down external debt.  Alternatively it is having a trade surplus and putting the cash in the bank. In this case the bank is the United States Government if you are Japan or China. You may also buy equipment from outside your company/country and put it on the fixed asset register and depreciate it over time. That is simply swapping cash for a useful asset.Companies and Countries can also increase the worth of the balance sheet another way. They can use their internal resources to create a useful physical asset that can also be put in the fixed asset register – thereby increasing the value of the balance sheet. This would be like a family deciding to build a house in the woods using only the materials they can personally find and process. Assuming a bank thinks that the outcome is a bankable asset, the family has created wealth without having to leave the forest or work with any other family. So it is true for countries. Contrary to the popular myth that international trading is essential to create wealth, a country can close its borders completely and set its people to work to build assets without external help.The proof of that statement is that Humans on Planet Earth have created huge wealth without having to trade with the Martians or the Venusians. We simply combined brain and brawn and got into the fields and built STUFF!So in simple terms here is the check list for any aspiring country that wants to become extremely wealthy:

1. Build lots of buildings; roads; infrastructure; factories; machines; products; ships; ports; airplanes; computers; USEFUL STUFF; STUFF; STUFF; STUFF

2. Sell it at home and abroad

3. Maintain a healthy trade surplus

4. Be friends with everyone that wants to be your friend and help them to make wealth

There is one other very important issue.  You need to maintain financial stability for the country to be successful.

1. Don’t let your banks do casino banking

2. Control currency flows tightly

3. Ensure all financial institutions maintain 14% or more as a reserve

4. Do not let the money markets mess about with your exchange rates for personal gain – it destabilises international trade.

You also need to maintain social stability and raise the educational level of your people:

1. Everyone gets free education up to a standard that is useful to industry

2. Everyone gets free health care up to a basic standard – you can’t have useful workers of the future dying off for no good reason. Why educate a child for 10 years and let him/her die.

3. Never, ever, ever, ever allow riots to begin, and if they do get going, stop them instantly

4. Deal with the underlying reasons for social instability such as poverty and inequality

5. Do not let your people become corrupted by those that wish to make a profit at any cost

6. Do not allow hateful ignorant minorities spread their views widely – the British Nazi Party a.k.a. British National Party would be a good example.

7. Stop access to filth on the internet – bye bye Google CN

Anyone who has got this far will have realised what I have done. I have just written down the way that the Chinese Government runs China. Basic universal health care comes in 2011.

RP&M to the Rescue!

What has all this got to do with Rapid Prototyping & Rapid Manufacturing??? I started with a quotation by WEN Jia-Bao, China’s Premier. WEN is the top operational man in China.  President HU Jin-Tao is the one all the foreigners know, but he really only deals with foreign politics.WEN reports to a 25 person Polit Bureau and executes their collective will. The PB executes the collective will of the Government as a whole – and the Government executes the collective will of the people. Yes, it really does work like that.The whole of China knows that the best way to make money for themselves or for their country is to SELL more than they BUY a.k.a. a trade surplus.  The whole country knows that building STUFF creates wealth. The better the STUFF is, the faster you make wealth.So, WEN urges China to – “Increase the strength of technical innovation and improve overall product quality [in China].” That sounds like Rapid Prototyping and Rapid Manufacturing to the Rescue!Imagine living in a country where the Top Guy is screaming out for your help. And he means it. My reading of the situation is that Obama is making similar noises. Brown and Cameron in the UK are NOT. They remain completely ignorant of how to run a country and are not calling out for help from anyone except the IMF!

State of RP&M in China

To be frank, RP&M in China has barely moved in recent years. CNC machining of prototypes is still cheaper than SL, SLS etc. Few wish to buy the super-expensive foreign RP equipment (except for hundreds of small Envisiontec machines that are going into the jewellery industry). The domestic manufacturers are ticking along, but not booming.RP technologies will not flourish in China until the factory gate price of a basic RP model is less than that of a typical CNC model.  For that to happen, the technology needs a step-change. Envisiontec is probably the only company currently poised to facilitate that.The Envisiontec Xede machine makes models much faster than the usual SL/SLS offerings. My money is on the Xede. The only problem is, for that to happen; someone has to teach the Chinese market about RP technologies. The typical designer remains ignorant or reluctant to try RP at a higher price.In September this year my company Star-Prototype launches for the first time to the Chinese market. Almost all good RP companies in China deal internationally not domestically. This is about to change.  To be sure the mists are clearing.Once China embraces RP&M as the Americans and Europeans did in the early 90’s, there will be breakneck growth in that industry for at least 15 years in the domestic Chinese market.  It is certainly my aim to hold on to the Tiger’s tail for as long as I can…

To the Rescue

Not to disappoint Premier WEN, I am sliding down the Fireman’s Pole as I sign off for yet another year. China knows how to make wealth. I only wish that my beloved Countrymen could stop blindly criticising China and open their eyes and relearn a lesson they forgot.Industry, Manufacturing, Construction, Science, and Engineering IS WEALTH CREATION.Gong Cheng Shi Wan Sui – Long Live the Engineers! Gordon Styles – 2010

Balance Sheet.  You would normally measure a company by the following calculation:
Fixed Assets + Intagible Assets (cash etc) – Borrowings = Balance Sheet Value (Company Value)

But, when it comes to measure the value of a closed loop system such as the value of Planet Earth, you can ignore all cash/equivalents (shares, bonds, derivatives etc.) and just measure the total value of all of the stuff. Cash/equivalents are merely an alternative bartering system for all of the STUFF within that closed loop system. It doesn’t matter if the Cash/Equivalents are overvalued or undervalued at the time of measurement, because in the long run they will eventually balance out to the value of all of the stuff in the system. That is why the World has cycles – boom-then-bust-then-boom-then-bust.

So, to measure the value of a country it is quite simple:  1. Ignore all of the internal cash/equivalents and consider the value of all of the assets as measured by their long-term average value.  That is all physical infrastructure.  For example the UK has a physical asset value of about USD 8 trillion; USA about USD 40 trillion; China about USD 10 trillion; Germany about USD 10 trillion.

EXTERNAL VALUE

Foreign Investment Abroad + Foreign Reserves – Foreign Investment at Home – Foreign Debt = External Value

UK is + 1.57 trillion + 0.05 trillion – 1.45 trillion – 9.04 trillion = minus – (8.87) trillion External Value

USA is +3.16 trillion + 0.08 trillion – 2.37 trillion – 13.75 trillion = minus – (12.88) trillion External Value

China is + 0.15 trillion + 1.96 trillion – 0.76 trillion – 0.4 trillion = plus + 0.95 trillion External Value

Germany is + 1.41 trillion + 0.14 trillion – 1.03 trillion – 5.16 trillion = minus – (4.64) trillion External Value

TOTAL BALANCE SHEET VALUE

So, the total value of the UK would be USD 8 trillion – 8.87 trillion = minus – (0.87) trillion Total Balance Sheet Value

So, the total value of the USA would be USD 40 trillion – 12.88 trillion = plus + 27.12 trillion Total Balance Sheet Value

So, the total value of China would be USD 10 trillion + 0.95 trillion = plus + 10.95 trillion Total Balance Sheet Value

So, the total value of German would be USD 10 trillion – 4.64 trillion = plus + 6.46 trillion Total Balance Sheet Value

TOTAL BALANCE SHEET VALUE PER PERSON in USDUSA = plus 90,400 per person
Germany = plus 80,000 per person
China = plus 8,111 per person – Not surprising given they are emerging
UK = minus (14,500) per person – No Surprise either – given the incompetence of the UK Government

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