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Monday, December 22, 2003

The Logic of Relative Prices

In a retrospectively obvious development, China is going to rent 17,300 acres (7,000 hectares) of arable land from Kazakhstan.

In a way, this isn't that much different that buying soybean from, say, Argentina: the soybean trade could be seen as the Chinese renting both land and labor from the Argentines. Not because Argentine labor is cheaper than the Chinese, but because soybean-bearing land is (at least at the prices dictated by Chinese demand), and sending Chinese labor to South America would be not only politically delicate, but also too expensive in any case. Kazakhstan sharing a border with China, and having ample almost unhabited zones, its "land for rent" is unbundled from its labor, and Chinese labor probably beats the local one in terms of wages.

Given the economic and demographic forces at play, I´d be surprised if this where the last of these deals.

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