Washed It!

National Security Agency-backed TopCoder Open competition raises big questions

By Patrick Thibodeau

Programmers from China and Russia have dominated an international competition on everything from writing algorithms to designing components.

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Whether the outcome of this competition is another sign that math and science education in the US needs improvement may spur debate. But of the 70 finalists in it, 20 were from China, 10 from Russia and only two from the US.

TopCoder, which runs software competitions as part of its software development service, operates TopCoder Open, an annual contest.

About 4,200 people participated in the US National Security Agency-supported challenge. The NSA has been sponsoring the program for a number of years because of its interest in hiring people with advanced skills.

Participants in the contest, which was open to anyone – from student to professional – and finished with 120 competitors from around the world, went through a process of elimination that finished this month in Las Vegas.

China’s showing in the finals was also helped by the sheer volume of its numbers, 894. India followed at 705, but none of its programmers were finalists. Russia had 380 participants; the United States, 234; Poland, 214; Egypt, 145; and Ukraine, 128, among others.

Of the total number of contestants, 93 percent were male, and 84 percent were aged between 18 and 24.

Rob Hughes, president and COO of TopCoder, said the strong finish by programmers from China, Russia, Eastern Europe and elsewhere is indicative of the importance those countries put on mathematics and science education.

“We do the same thing with athletics here that they do with mathematics and science there,” Hughes said. He said the US needs to make earlier inroads in middle schools and high school math and science education.

That’s a point Hughes is hardly alone on. President Barack Obama, as well as many of the major tech leaders including Bill Gates, have called for similar action.

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Of the participants in the contest, more than 57 percent had bachelor’s degrees, most in computer science, and of that 20 percent had earned a masters degree, and 6 percent a PhD.

But the winner of the algorithm competition was an 18-year-old student from China, Bin Jin, who went by the handle “crazyb0y”. Chinese programmers have a history of doing very well in this contest.

Mike Lydon, TopCoder’s CTO, said Jin’s future in computer science is assured. “This gentleman can do whatever he wants,” he said.

The participants are tested in design, development, architecture, among others, but one of the most popular is the algorithm coding contest.

To give some sense of difficulty, Lydon provided a description of a problem that the contestants were asked to solve:

“With the rise of services such as Facebook and MySpace, the analysis and understanding of such networks is a particularly active area of current computer science research. At an abstract level, these networks consist of nodes (people), connected by links (friendship).

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“In this problem, competitors were given the description of two such networks, but with the names of all the nodes removed from each. The networks were each scrambled up before given to the competitors. The task was to determine if the two networks could possibly be from the same group of people.

“The competitors were to unscramble and label the two networks so that if Alice was connected to Bob in one of the two networks, then Alice was also connected to Bob in the other network. This problem is known as the network isomorphism problem, and solving it for large networks is a major unsolved problem in the realm of theoretical computer science.”

Lydon said the overall problem is unsolved for larger networks, and what’s considered a correct answer for this problem would not be considered large enough for the solution in this case to be groundbreaking.

Two people solved the problem.

China has actually bought Treasury bonds at an accelerating pace over the last year, but the borrowing needs of the United States government have grown even faster. Prime Minister Wen Jiabao of China, right, and President Obama.

HONG KONG — Leaders in both Washington and Beijing have been fretting openly about the mutual dependence — some would say codependence — created by China’s vast holdings of United States bonds. But beyond the talk, the relationship is already changing with surprising speed.

China is growing more picky about which American debt it is willing to finance, and is changing laws to make it easier for Chinese companies to invest abroad the billions of dollars they take in each year by exporting to America. For its part, the United States is becoming relatively less dependent on Chinese financing.

China has actually bought Treasury bonds at an accelerating pace over the last year — notwithstanding Chinese officials’ complaints about American profligacy. But the borrowing needs of the United States government have grown even faster. So China represents a rapidly shrinking share of overall purchases of Treasury securities. “China’s demand for Treasuries has increased over the past year, but it hasn’t increased at anything like the pace of the Treasury’s sale of new Treasury bonds,” said Brad W. Setser, a specialist in Chinese financial flows at the Council on Foreign Relations.

Americans and investors elsewhere are buying Treasuries instead. They are saving more and have been shifting out of other investments — including equities until the past two months — and into Treasuries.

China bought less than a sixth of the Treasuries issued in the 12 months through March. Less than two years ago, by contrast, Chinese purchases of Treasuries, which included purchases in the secondary market as well as newly issued securities, briefly exceeded the entire borrowing needs of the United States.

Financial statistics released by both countries in recent days show that China paradoxically stepped up its lending to the American government over the winter even as it virtually stopped putting fresh money into dollars.

This combination is possible because China has been exchanging one dollar-denominated asset for another — selling the debt of government-sponsored enterprises like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. While this has been clear for months, new data shows that China is also trading long-term Treasuries for short-term notes, highlighting Beijing’s concerns that inflation will erode the dollar’s value in the long run as America amasses record debt.

So China’s rising purchases of Treasuries do not represent the confident bet on America’s future that they might seem to be on the surface. For instance, China does not appear to be dumping euros or yen to buy Treasuries, economists said.

That said, recent Chinese and American data suggest that an astounding 82 percent of China’s $2 trillion in foreign reserves is in dollars, according to calculations by Standard Chartered.

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The development has caught the attention of the leaders of both countries.

“The long-term deficit and debt that we have accumulated is unsustainable — we can’t keep on just borrowing from China,” President Obama said last Thursday.

Wen Jiabao, prime minister of China, also has expressed concern.

“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried,” Mr. Wen said earlier this year.

China now earns more than $50 billion a year in interest from the United States, Mr. Setser at the Council on Foreign Relations calculated.

China’s leaders were able to buy more Treasuries in recent months without buying more dollars because they have abruptly turned their back on the market for securities issued by government-sponsored enterprises.

China was the world’s biggest buyer of these securities a year ago, splashing out more than $10 billion a month.

But in the 12 months through March, it actually had net sales of $7 billion, and ramped up purchases of Treasuries instead.

China has also changed which Treasuries it buys. It has done so in ways calculated to reduce its exposure to inflation or other problems in the United States. As recently as a year ago, China actively bought long-dated bonds, seeking the extra yield they could bring compared to Treasury securities with short maturities, of which China bought virtually none.

But in each month since November, China has been buying more Treasury bills, with a maturity of a year or less, than Treasuries with longer maturities. This gives China the option of cashing out its positions in a hurry, by not rolling over its investments into new Treasury bills as they come due should inflation in the United States start rising and make Treasury securities less attractive.

The big question now for policy makers and economists alike lies in whether the Chinese government’s purchases of American securities will rise or fall in the coming months.

Two big forces are at work — but they are pushing Chinese investments in opposite directions and might cancel each other out.

The first big shift is that Chinese foreign exchange reserves might start growing again, after shrinking early this year.

A senior Chinese economic policy maker, Xu Lin, expressed concern here on Monday that the reserves might grow faster if speculators started pushing more foreign exchange into China in the months ahead.

China is strongly opposed to any significant appreciation or depreciation of its currency, Mr. Xu said at a press conference. But if international investors conclude that the Chinese economy has stabilized ahead of economies elsewhere, they may start pumping more money into the Chinese economy, he said.

To keep its currency at the same level, the Chinese government buys foreign currency flowing into the country in excess of China’s needs. If overseas demand for Chinese exports recovers, then China’s trade surplus could start widening again as well. This would also tend to fatten Chinese reserves.But the countervailing trend is that the Chinese government is trying to foster channels for foreign currency to be pumped out of the country without the involvement of the central bank. The government has been buying a wider range of assets and encouraging the private sector to invest more money overseas.

“That’s part of a strategic move by the authorities to diversify,” said Wensheng Peng, the head of China research at Barclays Capital. “The reserves growth should accelerate because of inflows, but it will not be as large as what we observed in 2007 and the first half of 2008.”

The State Administration of Foreign Exchange, which is part of the central bank, issued draft regulations on Monday that would make it considerably easier for private companies to raise dollars in China to spend on overseas investments — a step that would lessen the need for the Chinese government to buy up those dollars.

This spring China has also been stepping up its purchases of commodities, which are usually bought in dollars. Iron ore has been piling up on Chinese docks, government stockpiles of crude oil and grain are being expanded and stockpiles are being started for products like gasoline, diesel and sugar.

After six years of silence, China unexpectedly disclosed last month that it had been gradually buying gold from domestic producers. The country’s reserves had climbed from 600 tons in 2003 to 1,054 tons, worth $31.8 billion at prices late Wednesday.

The disclosure, which produced a frisson of excitement in gold markets, may have been aimed at reassuring a domestic audience that the Chinese government was not putting all the nation’s savings into American dollars. But the actual investment was tiny compared with China’s foreign exchange reserves — and showed that China was accumulating gold at a much slower rate than foreign currency.

A person in periodic contact with China’s central bank, who insisted on anonymity to preserve his access, said that a Chinese central banker complained to him last year that “we have so much money and there’s so little gold, we can’t buy much without driving up the price.”

NY Times

China emerges as world’s auto epicenter

America’s auto titans are dismantling their global empires. But across the Pacific, it’s as if the global economic forces that have pummeled Detroit never struck. Chinese auto sales are up, and this year China is projected to displace Japan as the world’s largest car producer.

Now, the auto world is buzzing that China’s auto industry may try to pick up the pieces of Detroit — at a bargain.

Chinese companies have tried to dampen speculation, issuing regulatory filings that deny bids to buy Ford’s Volvo or General Motor’s Saab. But there’s little doubt among analysts that Chinese automakers are interested in the United States and that Detroit’s automakers are interested in them.

‘Center of gravity is moving eastward’
The global auto industry is restructuring. Italy’s Fiat is on the verge of taking control of Chrysler. Last year India’s Tata Motors, already famous for its $2,000 Nano, acquired Jaguar and Land Rover.

And China’s auto sector has emerged as a threat to the long-standing pecking order. Earlier this year, Geely Automobile, one of China’s largest private carmakers, purchased an Australian drivetrain transmission supplier, a leading gearbox manufacturer. Weichai Power, one of China’s top diesel engine manufacturers, acquired a French diesel engine producer. Another Chinese company, BYD, which counts Warren E. Buffett as an investor, launched a mass-market plug-in electric car, ahead of GM’s anticipated Chevrolet Volt.

Detroit’s annual auto show in January was somber, but Shanghai’s show dazzled attendees with throngs of models, rock bands and light shows. This year, Nissan skipped Detroit and attended the Chinese event in April. Mercedes-Benz, BMW and Porsche all unveiled new-vehicle models in Shanghai.

“The center of gravity is moving eastward,” Dieter Zetsche, chairman of Daimler, told reporters at the show.

“When we look back 20 years from now, the year 2009 is likely to be viewed as the year in which the baton of leadership in the global auto industry passed from the United States to China,” Jack Perkowski, a Western transplant and former chairman of a Beijing auto parts company, wrote in his blog “Managing the Dragon.”

Hurdles ahead for exports to U.S.
Some of China’s bigger manufacturers, such as Chery Automobile, have trumpeted their intent to export Chinese-made vehicles to the United States in the next few years. To get there, they’ll need to revamp their products to meet stringent U.S. emissions and safety standards.

That’s no simple problem. Previous plans to ship Chinese cars to U.S. soil have crumbled. A company called Brilliance missed its goal of launching U.S. sales in 2009. BYD said it would introduce its cars to Americans in 2010, but has pushed their arrival to 2011. Other potential contenders have gone out of business or are struggling to stay afloat.

In 1994, Beijing released a plan to triple auto production by 2000 and reduce imports. The government lured foreign producers to bring their technology overseas and invest in Chinese auto parts firms. It aimed to modernize domestic manufacturing by creating joint ventures with foreign automakers such as GM.

As a result, China’s auto sales took off in 2000. In 2002, they crossed the 1 million mark. More recently, the numbers have taken a hit in the economic crisis, forcing companies to curb exports to countries such as Russia and Vietnam.

Stimulus, growing middle class spur growth
But after the industry pressed Beijing for a bailout late last year, the central government responded with subsidies and slashed the sales tax on small, fuel-efficient cars, spurring demand. And analysts say the expansion of the country’s web of roads and highways — part of an economic stimulus package — coupled with a growing middle class could fuel more sales for years to come.

In April, China’s vehicle sales jumped 25 percent, compared with a year earlier, to a record monthly high of 1.15 million units. It was the third consecutive month that China has surpassed the United States in sales.

GM, which has two joint ventures in the country, also hit a monthly record in April with its sales jumping 50 percent from a year earlier. The automaker plans to import cars from China starting in 2011, according to a GM plan circulating in Congress.

But in the United States, auto sales fell 34 percent last month. And GM, which has received $15.4 billion in U.S. government loans, says it is likely to file for bankruptcy protection.