Tag Archives: China

05.01.2013 | Intellectual Property: China’s Michael Jordan Trademark

The Wall Street Journal had a great headline: “In China, Air cheow-DAN Cries Foul.”

Saying, “I felt the need to protect my name, my identity, and the Chinese consumer,” Michael Jordan is suing the Chinese firm Qiaodan for using his name as its trademark. Pronounced cheow-DAN in Mandarin, the firm sells basketball shoes and jerseys in its 5700+ outlets.

Michael Jordan

Michael Jordan is not alone. Apple for the iPad, Hermes, and General Motors saying the Chinese name Chery Automobile was like Chevy, have also battled the Chinese to preserve their trademark rights. Soon Jeremy Lin might have the same problem. A Chinese firm paid $708 for the rights to his name from a Chinese trademark office (not Lin).

An economist would say that we have a classic free rider problem. Firms copying trademarks are benefiting from the real owner’s designs, time, quality control and reputation.

We should add that all WTO (World Trade Organization) members are required to observe trademark recognition rules in TRIPS (Agreement on Trade-Related aspects of Intellectual Property). China is a WTO member.

Sources and Resources: This FT blog has best summary of the trademark battles in China while you might find this textbook excerpt ideal for some trademark background. For more specifics on the Michael Jordan suit, this WSJ article and this Quartz article provide the details. Meanwhile, in “Sole Rights,” econlife looked at a trademark battle in the US.

Posted by: adminEcon
Tags: China, free rider, intellectual property, Michael Jordan, trademarks, TRIPs, WTO (World Trade Organization
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02.22.2013 | Purchasing Power

The Big Mac Index is out again and not much has changed. Norway’s Big Macs are expensive and Chinese Big Macs are cheap.

What do Big Mac prices tell us about purchasing power? Starting with an average U.S. price of $4.37, we can determine whether other currencies are overvalued or undervalued in comparison to the dollar. So, when we see that Norway’s Big Mac is $7.84 and a euro zone Big Mac will cost $4.88, we know the kroner and the euro are overvalued. By contrast, Mexico’s Big Mac is very inexpensive at $2.90 and predictably, at $2.57, yes, a Big Mac reflects China’s undervalued currency.

Next, I wondered whether a low price would be inexpensive domestically and discovered that we can use McWages. In 2011, a US McDonald’s employee buying a Big Mac would have needed 27 minutes of work while a person in China doing the same job needed 85 minutes. You can see, below, that a McDonald’s Indian employee needed close to 200 minutes to buy what he or she was making.

Finally, as economists, we should note that the Big Mac Index takes us to purchasing power parity (PPP). This 2 page St Louis Fed paper, though dated, provides the perfect discussion of PPP and the Big Mac.

Sources and Resources: I definitely recommend going to The Economist to see all Big Mac prices and to use their interactive graphic on current and past purchasing power parity. More academic but fascinating, the Ashenfelter paper on McWage purchasing power is here while a good summary of the paper and the source of my graph is at WSJ.com.

Note: This post has been minimally edited since it appeared.

Posted by: adminEcon
Tags: Big Mac Index, China, exports, imports, McWages, Mexico, Norway, Orley Ashenfelter, overvalued, purchasing power, purchasing power parity, St. Louis Fed, The Economist, undervalued
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01.25.2013 | The Debt Ceiling: A “Choose Your Own Adventure” Story

Have you ever read a “Choose Your Own Adventure” book? Letting the reader select a plot path, the series had multiple endings. Now, a Quartz reporter very cleverly has suggested alternative endings for the “plot path” of the Congressional debt ceiling discussion.

Proposed less than 2 weeks ago, the “Choose Your Own Adventure” debt ceiling story, however, needs to include an unforeseen twist. The House just passed new legislation for a debt ceiling hike to last until mid-May with a Congressional salary clause. The clause? If a “chamber of Congress” does not agree on a budget then its members don’t get paid until one develops or until their terms end.

Still relevant, the “Choose Your Own Adventure” starting scenarios, each with its own series of results, were:

“A fiscal consolidation bargain”
“A concession to Republican demands”
No agreement and the Treasury has insufficient funds to cover its obligations.

Now we can add a fourth initial scenario:

The House passes legislation to raise the debt ceiling for a limited time period.

Discussing the debt ceiling, we should take a look at the debt. Whenever the US borrows, someone, somewhere buys a Treasury security such as a bond. So who has more than $16 trillion in government securities?

Actually, we do.

We owe 2/3 of the debt to ourselves. The US government lends to itself by using, for example, Medicare trust fund cash it does not need. Meanwhile, individuals, businesses, state governments, local governments, pension funds–the list is long– also buy US Treasury securities.

Washington Post data from 2011. Now the total would be over $16 trillions but the holders remain very similar.

Washington Post data from 2011. Now the debt total would be over $16 trillion but the proportions for debt holder categories are similar.

The rest of the US debt is held by foreign governments, businesses, citizens, etc., with China and then Japan at the top of the list. Next are Caribbean Banking Centers, Oil Exporters, Brazil and then still, a long list with South Africa at the bottom.

Sources and Resources: Here, at Quartz, you can see the entire debt ceiling ”Choose Your Own Adventure” while for the debt, my information came from the US Treasury and Fox News and graphs are from the NY Times and the Washington Post. Finally, you can read more here in the Huffington Post about the debt ceiling legislation that just passed in the House. In addition, here and here econlife has debt ceiling facts and history.

Posted by: adminEcon
Tags: China, debt ceiling, Medicare, social security
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01.15.2013 | Population Growth: China’s One-Child Policy

Does being an only child matter?

Our answer starts with a sunflower seed story.

There once was a poor Chinese farmer who believed he could excel at nothing but sunflower seeds. Traditionally sold in bulk with other types of nuts, sunflower seeds had been nothing unusual. But then calling them Idiot’s Seeds, the farmer, Mr. Nian, stir-fried, salted, and packaged them. Soon, during the 1980s, millions of people in China were munching Idiot’s Seeds as they watched TV or played cards.

This takes us to China’s economic growth. According to an M.I.T. scholar, entrepreneurs like Mr. Nian fueled growth during the 1980s but then, after 1990, were constrained by the spread of SOEs (state owned enterprises). Now, a new study suggests another way that the Chinese government might be diminishing entrepreneurial initiative. Comparing Chinese children born before and after the one-child policy began during 1979, Australian researchers have concluded that being an only child in China could make you less willing to take risks, compete, trust people and be trustworthy.

So yes, with their GDP second only to the US, China’s economic growth has been meteoric. And their population growth has slowed (see below). However, their male biased one-child policy might have unintended economic consequences.

The UN line reflects current policy while the second line indicates results of universal implementation.

The UN line reflects current policy while the second line indicates the results of universal implementation.

Sources and Resources: This marketplace.org series of reports is a superb summary of China’s one-child policy. An excellent complement, the Australian research on the impact of single child is described in this Science Magazine podcast and transcript. (The study is gated.) Also this Bloomberg article and BBC article discuss the research and here is The Economist link for the above graph. Finally, for more on the Chinese economy, you can download the first chapter of Capitalism With Chinese Characteristics and also go to econlife here (where I first told the sunflower seed story), here and here.

Posted by: adminEcon
Tags: aging population, China, economic growth, one child policy, population growth
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12.20.2012 | Where is the World Economy Going?

Yesterday, the UN published a preview of its world economic outlook. While projections are always debatable, their graphs provide a snapshot of key economic issues.

GDP Outlook:

Oil Prices:

Grain Prices:

These projections and comments from a Société Générale Report also are helpful. Most enlightening, perhaps, is the potential drag on the world economy from the euro zone.

Sources and Resources: Société Générale data is from Business Insider while the preview of the UN Report is here. For a summary, this NY Times article discusses its dismal outlook.

Posted by: adminEcon
Tags: austerity, Australia, Businessinsider, China, developed economies, developing economies, euro zone, fiscal cliff, GDP growth, grain prices, oil prices, Societe Generale, US
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