You must watch this video. Inspirational (at least to me).
Promising more reforms to make India more attractive for foreign investments, Prime Minister Narendra Modi on Tuesday assured investors that he would “carefully hold” their hands and expressed hope that the GST would be rolled out in 2016.
Speaking at the India Singapore Economic Convention, Mr. Modi said India is exploring a potential partnership with Singapore’s Changi Airport for developments of two Indian airports and invited companies to join in building smart cities.
“In the last 18 months, the runways for the take-off of the economy have been made. Reforms are happening in a big way. They are now reaching to the last mile. Reform is to transform the system so that they perform. They aim at helping people realise their dreams. It means more charm on the faces and less forms in the offices. Efforts to deepen financial markets have been made,” he said.
‘Most open economy’
The Prime Minister said his government began to liberalise FDI laws soon after coming to power last year and the latest round of FDI reforms have made India the “most open economy” in the world.
“We are also conscious of last mile operational issues in such matters and we are fine tuning the norms. Recently, we further eased FDI norms, after which India is the most open economy in terms of FDI,” he added.
While talking about 40 per cent increase in FDI and improvement in rankings like ease of doing business and world competitiveness index, Mr. Modi said, “Perceptions are turning into positive outcomes”.
“We are hopeful to roll out GST regime in 2016. The company law tribunal is being set up. FDI inflows have gone up by 40 per cent compared with previous year’s comparative period. Perceptions are turning into positive outcomes. FDI commitments are translating into reality,” he noted.
Modi also outlined 14 decisive steps taken to address regulatory and taxation concerns and said that India offers tremendous opportunities for investments, ranging from affordable housing to smart cities, railways to renewable energy.
China’s Shan Dong Sun Paper Industry Joint Stock Co (002078.SZ) said on Monday it would spend about $1.36 billion to build a pulp mill in the United States in its first investment outside the country.
The facility is expected to break ground in 2016 and start operations in 2018, Sun Paper spokesman Song Weihua told Reuters.
The mill in the southeastern state of Arkansas is slated to make fluff pulp, a raw material for diapers and sanitary products.
On Friday Sun Paper Chairman Li Hongxin signed a memorandum of understanding for this at a ceremony in Jinan which was attended by U.S. Commerce Secretary Penny Pritzker and Arkansas Governor Asa Hutchinson.
The investment by the northern China-based company is the latest in a slew of deals by Chinese manufacturers looking to diversify their operations and take advantage of initiatives and rebates in western countries.
Shandong Tranlin Paper Co Ltd invested $2 billion in a paper and fertilizer plant in Virginia last year. (reut.rs/1PUY1r4)
Sun Paper declined to give details on its financing of the project, although sources said the company is likely to involve a combination of equity and debt.
ASKED what they think of Lu Hao, their governor, residents of Harbin, capital of the north-eastern province of Heilongjiang, often reply with the word xiaozi. This roughly translates as “young whippersnapper”.
Mr Lu’s youthfulness is indeed striking. Born in 1967, he is the youngest of China’s current provincial governors. He was also the youngest to hold most of his previous positions. Those include factory boss at a large state-owned enterprise, deputy mayor of Beijing and leader of the Communist Youth League, an important training ground for many a national leader.
China’s system of political succession produces occasional surprises, such as the purge three years ago of another provincial leader, Bo Xilai, on the eve of what appeared to be his likely elevation to the pinnacle of power, the Politburo Standing Committee, alongside Xi Jinping, who is now president. But at least since the Communist Party began institutionalising succession arrangements in the 1990s, high-flyers have often been easy to spot. Mr Lu is one of them.
His stint at the youth league was of greatest portent. The organisation is something like an American fraternity club (without the misbehaviour)—its members form close ties which are often maintained in their later careers. Its leaders have a tendency to move into high national office. Hu Yaobang, a party chief in the 1980s, grew to prominence in the league, as did Hu Jintao, Mr Xi’s predecessor. Li Keqiang, the current prime minister, is also an ex-head of the league. Mr Lu’s stint in that role from 2008-13 made him an obvious rising star. His subsequent promotion to a provincial governorship confirmed this impression.
Youth is on his side. The next rung on the ladder to the top may be induction into the 25-member Politburo, possibly as early as 2017. But it will not be until around the time of the party’s 20th congress in 2022—a year after its 100th birthday—that Mr Xi will retire and Mr Lu will have a chance to shine, likely as one of the (now seven) members of the Standing Committee. He will then be 55, a year older than Mr Xi was when he joined the body in 2007. That would give Mr Lu a good few years at the top: Standing Committee members are expected to retire around 70. He would be a member of what party officials already call the “sixth generation” of Communist leaders (the first having been led by Mao Zedong, Mr Xi representing the fifth).
There are several other likely members of the upcoming generation. They include Hu Chunhua, Mr Lu’s predecessor as head of the youth league who is now the party boss of the southern province of Guangdong; and Sun Zhengcai, the party chief of Chongqing, a south-western region. One rising star has already fallen, however. Su Shulin was thought to have bright prospects until he was removed as governor of coastal Fujian province after being snared in a corruption investigation in October.
China’s media often drop hints of who to watch. Mr Lu’s appointment as Heilongjiang’s governor (a few months after he became the youngest full member of the party’s 370-strong Central Committee) was accompanied by a flurry of celebratory articles in the party’s main mouthpiece, the People’s Daily, and other newspapers. They emphasised Mr Lu’s youth, impeccable work ethic and solid record of excellent performance in his previous jobs.
Source: The north star | The Economist
Narendra Modi hasn’t given a news conference in India since becoming prime minister last year.
So when he arrived in the U.K. on Thursday and addressed the media with his counterpart, David Cameron, British reporters seized the opportunity to ask a few pointed questions.
Referring to recent incidents of religious violence, BBC correspondent Justin Rowlatt kicked off by asking Mr. Modi: “India is becoming an increasingly intolerant place. Why?”
Mr. Modi answered, in Hindi: “India is the land of Buddha. India is the land of Gandhi. And so, it is in our culture and blood that we don’t accept anything against the basic values of society.”
He continued: “For us, every incident is serious. We don’t tolerate it under any circumstances. Law takes strict action and will continue to do so. India is a vibrant democracy, and its constitution provides for the safety of people from all strata of society. We are committed to protecting freedom of thought.”
A little later in the news conference, Guardian reporter Nicholas Watt asked Mr. Cameron what he felt about the visit. “How comfortable do you feel welcoming Prime Minister Modi to this country given that for the first two years of your premiership he was not permitted to visit this country because of his record as chief minister of Gujarat?”
The U.K. distanced itself from Gujarat and Mr. Modi after religious riots in the state that killed more than 1,000 people, mostly Muslims, in 2002, when Mr. Modi was the state’s top official. Mr. Modi has denied wrongdoing and court investigations have said there isn’t enough evidence to prosecute him.
Mr. Watt then asked about Europe’s migrant crisis and the U.K.’s referendum on European Union membership before turning back to India.
“Prime Minister Modi, can I ask you: Tomorrow night you will obviously have a rapturous reception at Wembley Stadium. But there are a number of protesters out today who are saying—and I am wondering what you say to them—that given your record as chief minister of the state of Gujarat, you do not deserve the respect that would normally be accorded to the leader of the world’s largest democracy.”
Mr. Cameron answered by citing Mr. Modi’s “record and historic majority” in the Indian parliament after the 2014 election. Mr. Modi then said he was never denied entry to the U.K. The U.S. refused him a visa in 2005 based on his response to the riots but issued him one in 2014, after he became prime minister.
“To keep the record straight, I would like to give some information,” Mr. Modi said. “I came here in 2003 and received a big welcome and respect, and participated in several programs. The U.K. has never stopped me from coming here, has never imposed any restrictions. I couldn’t come here due to a lack of time. That’s a different issue. So this is a wrong perception. Please correct it.”
Mr. Modi then spoke on the British referendum and proceeded to take a question on trade and economic cooperation from an Indian reporter. He never directly addressed the last part of Mr. Watt’s question.
Yale Zhang, the head of Shanghai-based consultancy Automotive Foresight, called the export of the Buick Envision SUV from China to the U.S. a “landmark.”
“It means that China’s manufacturing quality has met the requirements of the world’s strictest market,” he said.
GM introduced the Buick Envision SUV in China last October. Since then, it has been one of the best-selling cars sold by GM in the country. According to the China Association of Automobile Manufacturers, a government-backed industry group, the Envision ranked seventh in China’s fast-growing SUV market in October, with monthly sales of 17,300 vehicles. Data from Automotive Foresight show that sales of Buick Envision SUVs totaled 100,826 cars in the period from January to September.
Despite the progress, experts say that Chinese home-grown car manufacturers will continue struggling to compete with foreign brands, even in China.
China is already the world’s largest market for cars in terms of sales and production. But global auto makers have been slow to ship Chinese vehicles to the U.S. and Europe on worries that Western buyers would shun them over quality concerns. European car maker Volvo Car Corp., which is owned by China’s Zhejiang Geely Holding Group Co., was the first to challenge that assumption when it started shipping sedans from a plant in China to the U.S. this spring. A Volvo China spokesman declined to disclose how many Chinese-made Volvos have been shipped to the U.S., saying only that it is a “small volume.”
A study released by automotive industry consultants J.D. Power in October shows that although Chinese car makers have been improving in quality in recent years, they still lag behind international brands in producing reliable vehicles. According to the study, Chinese brands had 120 problems for every 100 vehicles this year, compared with 131 in 2014 and 155 in 2013. International brands had 98 problems for every 100 vehicles in 2015.
“Buick is a household brand in the U.S.,” said Ms. Li from Deren Electronic. “American consumers are probably not aware that the car is made in China. But Chinese local auto brands, like Chery and Geely, are little known outside of China.” Victor Yang, a spokesman for Zhejiang Geely Holding Group Co., said that as a global player, it’s normal for GM to sell its China-made cars at home in the U.S. “All the cars made by foreign companies in China should be produced in line with their global standards,” Mr. Yang said.
“Geely aims to sell its cars to developed markets including the U.S. By doing so, our quality and technology will be well recognized,” he said, without specifying a time frame. Jin Yibo, a vice president for Chery Automobile, said that Chinese home-grown auto makers “will absolutely go to the U.S. and other developed markets to sell their cars.”
But he cautioned: “It will take time.”
Indian Prime Minister Narendra Modi’s Air India aircraft made touchdown this morning at 10 a.m. in Heathrow for his long-awaited bilateral level visit to the United Kingdom — his first since becoming Prime Minister.
He was met at the airport by Hugo Swire, Minister of State for the Foreign Office, and Priti Patel, Minister for Employment and Diaspora Champion in the David Cameron government. His visit carries expectations for agreements and partnerships worth billions of dollars across defence, security, finance and sectors like education, research and health.
Mr. Modi is accompanied by a high power business delegation that included Cyrus P. Mistry, chairman, Tata Sons, Sunil Bharti Mittal, chairman, Bharti Enterprises Limited and N. Chandrasekaran, CEO and managing director of Tata Consultancy Services.
Mr. Modi will be greeted by a Guard of Honour at Westminster,which will be followed by delegation level talks at 10 Downing Street with Mr. Cameron. The two Prime Ministers will address a joint press conference after which Mr. Modi will deliver his speech in parliament. He will also garland the statue of Mahatma Gandhi in Parliament Square. The evening will see important agreements between the two country delegations finalised at Guildhall, City of London. Mr. Modi will stay the night at the Prime Minister’s country residence at Chequers.
The pomp and ceremony attached to the visit is expected to include a special tricolour flypast by the Red Arrows Royal Air Force (RAF) Aerobatic Team over the Buckingham Palace before the Prime Minister sits down for lunch with Queen Elizabeth II ahead of his mega diaspora address at the iconic Wembley Stadium in north London.
A widely held Western view of China is that its stunning economic success contains the seeds of imminent collapse. This is a kind of anchoring bias,1 which colors academic and think-tank views of the country, as well as stories in the media. In this analysis, China appears to have an economy unlike others—the normal rules of development haven’t been followed, and behavior is irrational at best, criminal at worst.
There’s no question, of course, that China’s slowdown is both real and important for the global economy. But news events like this year’s stock-market plunge and the yuan’s devaluation versus the dollar reinforce the refrain, among a chorus of China watchers, that the country’s long flirtation with disaster has finally ended, as predicted, in tears. Meanwhile, Chinese officials, worried about political blowback, are said to ignore advice from outside experts on heading off further turmoil and to be paranoid about criticism.
My experience working and living in China for the past three decades suggests that this one-dimensional view is far from reality. Doubts about China’s future regularly ebb and flow. In what follows, I challenge five common assumptions.
- China has been faking it
A key tenet of the China-meltdown thesis is that the country has simply not established the basis for a sustainable economy. It is said to lack a competitive, dynamic private-enterprise structure and to have captured most of the value possible from cheap labor and heavy foreign investment already.
Clearly, China lacks some elements of a modern market economy—for example, the legal system falls short of the support for property rights in advanced countries.2 Nonetheless, as China-economy scholar Nicholas Lardy recently pointed out, the private sector is vibrant and tracing an upward trend line. The share of state-owned enterprises in industrial output continues to drop steadily, from 78 percent in 1978 to 26 percent in 2011.3 Private industry far outstrips the value added in the state sector, and lending to private players is growing rapidly.
In fact, much of China’s development model mirrors that of other industrializing and urbanizing economies in Asia and elsewhere. The high savings rate, initial investments in heavy industries and manufacturing, and efforts to guide and stabilize a rapidly industrializing and urbanizing economy, for example, resemble the policies that Japan, South Korea, and Taiwan followed at a similar stage of their development. This investment-led model can lead to its own problems, as Japan’s experience over the past 20 years indicates. Still, a willingness to intervene pragmatically in the market doesn’t imply backwardness or economic management that’s heedless of its impact on neighboring economies and global partners.
Furthermore, China’s reform initiatives4 since 2013 are direct responses to the structural changes in the economy. The new policies aim to spur higher-value exports, to target vibrant emerging markets, to open many sectors for private investors, and to promote consumption-led growth rooted in rising middle-class incomes. Today, consumption continues to go up faster than GDP, and investors have recently piled into sectors from water treatment to e-commerce. These reforms are continuing at the same time China is stepping up its anticorruption drive, and the government hasn’t resorted to massive investment spending (as it did in 2008). That shows just how important the reforms are.
- China’s economy lacks the capacity to innovate
Think tanks, academics, and journalists alike maintain that China has, at best, a weak capacity to innovate—the lifeblood of a modern economy. They usually argue as well that the educational system stomps out creativity.
My work with multinationals keen on partnering with innovative Chinese companies suggests that there’s no shortage of local players with a strong creative streak. A recent McKinsey Global Institute (MGI) study describes areas where innovation is flourishing here.5 Process innovations are propelling competitive advantage and growth for many manufacturers. Innovation is at the heart of the success of companies in sectors adapting to fast-changing consumer needs, so digital leaders like Alibaba (e-commerce) and Xiaomi (smartphones) are emerging as top global contenders. Heavy investment in R&D—China ranks number two globally in overall spending—and over a million science and engineering graduates a year are helping to establish important beachheads in science- and engineering-based innovation. (See “Gauging the strength of Chinese innovation.”)
- China’s environmental degradation is at the point of no return
To believe this, you need to think that the Chinese are content with a dirty environment and lack the financial muscle to clean things up. OK, they got things wrong in the first place, but so did most countries moving from an agrarian to an industrial economy.
In fact, a lot that’s good is happening. Start with social activism. A documentary on China’s serious air-pollution problems (Under the Dome), by Chai Jing—a former journalist at China Central Television (CCTV), the most important state-owned broadcaster—was viewed over 150 million times in the three days after it was posted online, in March 2015. True, the 140-minute video, which sharply criticizes regulators, state-owned energy companies, and steel and coal producers, was ultimately removed. But the People’s Daily interviewed Chai Jing, and she was praised by a top environmental minister.
China is spending heavily on abatement efforts, as well. The nation’s Airborne Pollution Prevention and Control Action Plan, mandating reductions in coal use and emissions, has earmarked an estimated $277 billion to target regions with the heaviest pollution.6That’s just one of several policy efforts to limit coal’s dominance in the economy and to encourage cleaner energy supplies. My interactions with leaders of Chinese cities have shown me that many of them incorporate strict environmental targets into their economic master plans.
- Unproductive investment and rising debt fuels China’s rapid growth
To believe this, you would have to think, as many skeptics do, that the Chinese economy is fundamentally driven by overbuilding—too many roads, bridges, and buildings.7 In fact, as one economist has noted, this is a misperception created by the fact that the country is just very big. An eye-popping statistic is illustrative: in 2013, China consumed 25 times more cement than the US economy did, on average, from 1985 to 2010. But adjusted for per-capita consumption and global construction patterns, China’s use is pretty much in line with that of South Korea and Taiwan during their economic booms.8
China’s rising debt, of course, continues to raise alarms. In fact, rather than deleveraging since the onset of the financial crisis, China has seen its total debt quadruple, to $28.2 trillion last year, a recent MGI study found.9 Nearly half of the debt is directly or indirectly related to real estate (prices have risen by 60 percent since 2008). Local governments too have borrowed heavily in their rush to finance major infrastructure projects.
While the borrowing does border on recklessness, China’s government has plenty of financial capacity to weather a crisis. According to MGI research, state debt hovers at only 55 percent of GDP, substantially lower than it is in much of the West. A recent analysis of China’s financial sector shows that even in the worst case—if credit write-offs reached unprecedented levels—only a fairly narrow segment of Chinese financial institutions would endure severe damage. And while growth would surely slow, in all likelihood the overall economy wouldn’t seize up.10
Finally, the stock-market slide is less significant than the recent global hysteria suggests. The government holds 60 percent of the market cap of Chinese companies. Moreover, the stock market represents only a small portion of their capital funding. And remember, it went up by 150 percent before coming down by 40.
Rumors drive the volatility on China’s stock exchange, often in anticipation of trading by state entities. The upshot is that the direct impact on the real economy will most likely be some reduction in consumer demand from people who have lost money trading in shares.
- Social inequities and disenfranchised people threaten stability
On this one, I agree with the bears, but it’s not just China that must worry about this problem. While economic growth has benefited the vast majority of the population, the gap between the countryside and the cities is increasing as urban wealth accelerates. There’s also a widening breach within urban areas—the rich are growing richer.11
Urban inequality and a lack of access to education and healthcare are not problems unique to China. People here and in the West may find fruitful opportunities to exchange ideas because the pattern across Western economies is similar. Leaders of the central government have suggested policies to improve income distribution and to create a fair and sustainable social-security system, though implementation remains a matter for localities and varies greatly among them.
In short, China’s growth is slower, but weighing the evidence I have seen, the sky isn’t falling. Adjustment and reform are the hallmarks of a stable and responsive economy—particularly in volatile times.