Archive for ‘Economics’

22/10/2014

Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek

With the Indian smartphone market booming, Xiaomi has made a splash with its weekly flash sales on Flipkart, an Indian rival to Amazon.com (AMZN). When the Chinese smartphone brand conducted another of its sales on Tuesday, over 300,000 people registered to buy some 90,000 of its Redmi 1S phones priced at 5,999 rupees (or $98). In last week’s sale, the Xiaomi phones sold out in four seconds.

The Spice Android One Dream Uno smartphone

Xiaomi isn’t the only foreign company looking to take advantage of consumer demand for inexpensive alternatives to the iPhone (AAPL). The company with perhaps the most ambitious plan is Google (GOOG), which last month made India the first market for its new Android One smartphone operating system. Google teamed up with local brands Micromax, Karbonn, and Spice, all of which have recently introduced smartphones priced around 6,000 rupees.

India particularly needs better low-cost phones, argues Caesar Sengupta, Google’s vice president of product development in Singapore and head of the Android One project. India’s mobile operators don’t offer the sort of generous subsidies that consumers in the U.S. and other markets take for granted. ”In the U.S., when you buy an iPhone, it costs $600 to $700 but you get a subsidy, so to a consumer it feels you are buying a $200 phone,” Sengupta says. In India, the cost to the consumer is much closer to the actual cost of the hardware.

via Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek.

22/10/2014

India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek

Narendra Modi has proven once again how important it is to be lucky in politics. In the spring, he was India’s opposition leader, running for prime minister by focusing on the government’s mismanagement of the economy. He had plenty of ammunition: The coalition led by the Congress Party had presided over years of corruption scandals and stalled reforms—and also had to contend with a growing budget deficit fueled by soaring prices for oil and other imported commodities.

In India, Falling Oil Prices Make Modi's Job Much Easier

During the campaign, Modi said he wanted to cut back on the costly subsidies the government offered millions of Indians to cushion the blow of those soaring prices. Petroleum subsidies account for one-quarter of India’s 2.6 trillion rupee ($42.4 billion) subsidies bill. But after he won in a landslide, Modi’s first budget (which his finance minister announced in July), was a modest plan that left the subsidies untouched.

That left observers unsure as to whether Modi was backing away from the politically difficult task of making the cuts. “We can either trust that the government will deliver price hikes as the year progresses,” Mirza Baig, head of foreign exchange and interest rate strategy at BNP Paribas in Singapore, wrote in a report after the budget announcement in July. “Or we can be more cynical and suggest that the Modi administration intends to continue the practice of rolling forward subsidy expenditure to next year.”

via India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek.

22/10/2014

Facebook’s Zuckerberg Gets a Toehold in China – Businessweek

In its quest to dominate the social media industry worldwide, Facebook (FB) has long hankered after China, where the company been been banned since 2009. Facebook may have just gained a foothold to help it infiltrate the Chinese market: the appointment of Chief Executive Officer Mark Zuckerberg to the board of one of China’s top business schools, the Tsinghua University School of Economics and Management.

Tsinghua University in Beijing

Tsinghua University announced Zuckerberg’s appointment on Monday to the school’s board, a meeting ground of sorts for Western corporate higher-ups and Chinese officials. In addition to Zuckerberg and top brass from IBM (IBM) , Anheuser-Busch InBev (BUD), and other multinationals, it includes Chinese government officials and entrepreneurs tasked with advising Tsinghua SEM’s development.

To the business school, Zuckerberg is an impressive name to add to a cadre of corporate superpowers. To Zuckerberg, who will fly to Beijing this week to attend the school’s annual board meeting, the appointment could provide an additional way for Facebook to make its case for reentering China, analysts say.

via Facebook’s Zuckerberg Gets a Toehold in China – Businessweek.

22/10/2014

Diesel Deregulation Frees Up Billions for India to Spend More Wisely – India Real Time – WSJ

India’s decision to end government control of diesel fuel prices will save the government billions of dollars which can be better spent on more pressing needs such as building schools, roads and ports, analysts say.

India announced over the weekend that it would end a decades-old policy of controlling the retail price of diesel fuel. Providing diesel at below-market rates cost the government about $10 billion last year, hampering India’s ability to spend on other things.

The government had given up control over the prices of gasoline back in 2010 but had continued to regulate prices of diesel – the primary fuel used in trucks and tractors as well as for running generators used to power irrigation pumps.

“It shields the government’s finances from volatility in global oil prices, because of which the subsidy bill often went up,” said Radhika Rao, an economist at DBS Bank.

HSBC estimates that the diesel deregulation will drop fuel subsidy bill to around 0.4% of gross domestic product, half of the 0.8% of GDP it paid last year.

“Our estimate is that over the next few years, fuel subsidies should remain contained,” said Prithviraj Srinivas, an economist at HSBC.

Diesel subsidies cost India close to $50 billion over the last five years, economists say. If India sticks to its guns and lets fuel prices meander with global markets, it will no longer have to foot that kind of unproductive expense. Instead, it can now choose to lower its fiscal deficit or spend more on infrastructure development or social development programs.

Analysts say the government’s fiscal deficit target of 4.1% of GDP this fiscal year – a level that many analysts had thought optimistic – now looks within reach.

via Diesel Deregulation Frees Up Billions for India to Spend More Wisely – India Real Time – WSJ.

22/10/2014

Airbus Helicopters expects China to become biggest market by 2020 | Reuters

Airbus Helicopters, the world’s largest civil helicopter maker, expects China and Hong Kong to become its biggest global market within six years as Beijing starts to lift restrictions on the use of low altitude airspace from 2015.

A general view of an EC145 helicopter being assembled at the Airbus production facility in Donauwoerth, Southern Germany October 9, 2014.    REUTERS/Michaela Rehle

The Airbus Group NV’s (AIR.PA) helicopter division expects to increase its annual sales in China to 150 units by 2020 from around 30-40 helicopters now, its China president Norbert Ducrot told Reuters.

Sales in the United States, the firm’s biggest market, average around 120-150 aircraft per year.

“The China market is very small with a big potential,” Ducrot said in an interview in Beijing. “I am pretty sure around 2020, China will be the first market for Airbus Helicopters.”

“Before (our customers) were mostly state companies, police and fire fighting, but now we can see the emergence of civil private helicopter operators,” he added.

China simplified flight approval procedures for private aircraft late last year, but the fledgling market for helicopters and small aircraft has been constrained by the military’s control of low altitude airspace.

A dearth of small airports, maintenance facilities, mechanics and pilots have also hampered the sector’s growth.

Ducrot said he expects demand for helicopters and small aircraft to pick up gradually when China starts to open up its low altitude airspace next year.

As infrastructure improves and the military opens up more airspace by 2020, Ducrot estimates there will be 50,000 helicopters in China over the next 30 years. There are only about 330 helicopters currently in operation in China, including Hong Kong.

via Airbus Helicopters expects China to become biggest market by 2020 | Reuters.

22/10/2014

Boeing and Chinese partner to make jet fuel from ‘gutter oil’ | Reuters

Aircraft makers Boeing and Commercial Aircraft Corp of China have launched a joint pilot project to turn used cooking oil into jet fuel.

Their plant, based in the southeastern Chinese city of Hangzhou, will be able to convert just under 240,000 litres a year of used cooking oil into fuel, Boeing said in a statement.

The project will allow the two aircraft makers to test the viability of producing biofuel using the cheap and widely available form of cooking waste, referred to in China as “gutter oil“.

Boeing and its Chinese state-owned partner estimate that 1.8 billion litres of fuel could be produced in China a year using gutter oil.

In February, the Civil Aviation Administration of China granted a subsidiary of state-owned behemoth Sinopec Corp a licence to produce jet fuel from used cooking oil.

Gutter oil has long been a public health concern in China due to its widespread use in restaurants. Used cooking oil can contain toxic compounds and is often considered insanitary.

Chinese media reported in 2010 that crime rings were collecting used cooking oil from sewers and drains, rebottling it and selling it as new.

Over the past two years, dozens of people have been given lengthy prison sentences for the scam, which has made many Chinese in major cities sick. Last year one man was sentenced to life in prison for making and trafficking gutter oil.

via Boeing and Chinese partner to make jet fuel from ‘gutter oil’ | Reuters.

21/10/2014

Schindler Raises Profit Forecast as China, India Grow Faster – Businessweek

Schindler Holding AG (SCHP) raised its full-year profit forecast after the Swiss elevator maker’s nine-month earnings were boosted by rapidly expanding sales in China and India.

Schindler increased its net profit forecast by 15 million francs ($16 million) to as much as 865 million francs, supported also by the consolidation of Chinese subsidiary XJ-Schindler and the sale of land in Switzerland. Ebikon-based Schindler stuck to a prediction of 6 percent to 8 percent sales growth in local currencies.

Silvio Napoli, who became chief executive officer in January after almost six years as head of Schindler’s Asia-Pacific business, was promoted as the Swiss company expands operations in Chinese and Indian markets, where it predicts sales of elevators will grow fastest over the next decades. Schindler is far exceeding market growth in each of these countries, the company said today.

Nine-month net income gained 91 percent to 703 million francs, while sales rose 3.2 percent to 6.7 billion francs.

Earnings at Schindler, a company with a market capitalization of $15 billion, bucked a more subdued outlook among European industrials. Royal Philips NV Chief Executive Officer Frans Van Houten said yesterday that the maker of health-care equipment and light bulbs is facing sustained softness in a number of markets such as China and Russia, after reporting quarterly earnings that missed estimates.

The Schindler and Bonnard families, along with related parties, hold 67.3 percent of the voting rights in the company which dates back to 1874.

via Schindler Raises Profit Forecast as China, India Grow Faster – Businessweek.

21/10/2014

India Steps Closer to Ending 40-Year-Old Monopoly on Coal – Businessweek

India stepped closer to ending a four-decade-old government monopoly on mining and selling coal as Prime Minister Narendra Modi seeks to tackle fuel shortages.

India Coal Mine

The government approved a decree enabling it to permit commercial mining in future, Finance Minister Arun Jaitley said at a briefing in New Delhi yesterday, without giving a timeline. The ordinance also allows auctions of coal mines to private companies for their own use, he said.

Modi made curbing blackouts a priority after sweeping to office in May on a pledge to revive growth in Asia’s third-largest economy from near the slowest pace in a decade. State-owned Coal India Ltd. (COAL) has missed output targets in at least the past four years, and easing its grip may allow companies such as Sesa Sterlite Ltd. (SSTL) and NMDC Ltd. (NMDC) to profit from the world’s fifth-biggest reserves.

Enabling private companies to mine and sell coal would be “one of the key game-changing reforms,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai. “Fuel availability has been a big concern for the economy.”

Opening up the coal industry risks stoking protests by some of Coal India’s about 325,000 workers and executives, at the same time as the government prepares to sell a 10 percent stake in the company that would fetch about 228 billion rupees ($3.7 billion).

Coal India accounts for more than 80 percent of the country’s production. The government wants to spur competition in the industry, Jaitley told the NDTV 24×7 television channel today.

via India Steps Closer to Ending 40-Year-Old Monopoly on Coal – Businessweek.

21/10/2014

China to pitch high-speed trains to California | Reuters

State-backed China CNR Corporation is making a pitch to sell its high-speed trains to California, signaling China’s growing export ambitions for such technology after building the world’s longest network in just seven years.

A high-speed train travelling to Guangzhou is seen running on Yongdinghe Bridge in Beijing, December 26, 2012. REUTERS/China Daily

It marks the first concrete attempt by China to sell high-speed locomotives abroad and establish itself as a credible rival to sector leaders such as Germany’s Siemens, Canada’s Bombardier and Japan’s Kawasaki.

CNR, its unit Tangshan Railway and U.S.-based SunGroup USA are submitting an expression of interest to California’s $68 billion high-speed rail project for a contract to supply up to 95 trains that can travel as fast as 354 kilometers per hour (221 miles per hour), SunGroup told Reuters.

via China to pitch high-speed trains to California | Reuters.

21/10/2014

China’s reform tally since November 2013 policy meeting | Reuters

China’s leadership unveiled a blueprint for some of the most comprehensive economic and social reforms in nearly 30 years in November 2013.

Implementation since then has been slow but steady. China has eschewed riskier, game-changing reform but the incremental steps aim to reach enough critical mass to sustain momentum and help the world’s second-largest economy shift down fairly smoothly after decades of investment-fueled growth.

The following are some of the significant steps taken since the Communist Party Central Committee’s Nov 9-12 policy conclave:

OCTOBER, 2014

Oct 16 – The top economic planner is considering tightening rules for bond issues, according to traders and a leaked document.

Oct 11 – The State Council says it will institute a resource tax on coal while eliminating other taxes to simplify the tax structure.

Oct 9 – China levies tariffs on coal imports in a move to reduce the country’s dependence on the polluting energy source.

SEPTEMBER, 2014

Sept 9 – Domestic firms in many areas no longer require government approval to invest overseas but must register their investments with authorities starting Oct 6.

Sept 1 – The budget law is revised to allow local governments to issue bonds directly.

AUGUST, 2014

Aug 29 – The Politburo approves salary cuts for top officials at big state-owned firms to counter graft and income inequality.

Aug 26 – China cuts on-grid prices of thermal electricity from Sept. 1 to reflect a fall in coal prices.

Aug 20 – The government cuts taxes on high-tech companies, abolishes the need for firms to seek approvals in 68 further areas and additionally allows lower levels of government to approve business projects in 19 other areas.

Aug 15 – China eliminates 21 approval processes for a list of industries and lower levels of government are given the right to approve certain projects in an effort to cut red tape.

Aug 12 – China will raise natural gas prices for bulk buyers and non-residential use from Sept. 1 in an effort to reform pricing.

Aug 4 – Foreign firms in China are allowed to use their registered capital to buy stakes in other Chinese companies.

JULY, 2014

July 15 – The state-owned enterprise regulator chooses six state firms to test out reforms expanding the role of private capital in China’s state sector.

July 14 – China loosens currency controls to make it easier for domestic companies and individuals to set up special purpose vehicles (SPVs) for investments overseas.

July 2 – Banks are allowed to set their own exchange rates for the yuan against the dollar in over-the-counter deals with clients.

JUNE, 2014

June 27 – Regulators lower the threshold for banks to enter the foreign exchange market and removes a layer of approvals.

June 25 – China gives the greenlight to three banks wholly funded with capital from private firms, to be the country’s first private lenders.

MAY, 2014

May 21 – The experiment for China’s first municipal bond market is launched.

May 21 – Private firms are invited to invest in 80 major projects in the energy, information and infrastructure sectors.

May 16 – Financial regulators tighten oversight of interbank loans.

May 16 – China sets up international energy trading center where crude oil futures will be traded for the first time.

May 15 – Securities firms get the go-ahead to expand into new businesses such as the online financial services market.

May 6 – State-owned enterprises to increase dividend payouts by 5 percentage points to up to 25 percent of their profits.

APRIL, 2014

April 23 – Premier Li Keqiang says China will allow private investment in 80 projects in energy, information and infrastructure.

April 22 – Changes to the environmental law seeking stiffer penalties for polluters submitted to parliament.

April 11 – Chinese firms can invest up to $1 billion overseas without seeking approval, China’s top planner says.

April 10 – China allows cross-border stock investment between Shanghai and Hong Kong.

April 9 – The government relaxes price controls over non-public hospital services.

April 2 – The government says will fast-track some spending and cut taxes for small firms, as a way of supporting the weakening economy.

MARCH, 2014

March 31 – Britain and China sign an agreement to set up a clearing service for offshore yuan trading in London. That follows a similar agreement with Germany.

March 24 – China simplifies review procedures for mergers and acquisitions.

March 21 – The securities regulator issues rules for a pilot program allowing listed companies to issue preferred shares.

March 20 – The foreign exchange regulator relaxes curbs on foreign investment in China’s stock market.

March 20 – PetroChina, China’s biggest oil and gas producer, is welcoming private investment into oil and gas pipelines in China, according to chairman Zhou Jiping.

March 20 – China lifts ban on equity financing for listed property developers after four years.

March 16 – China sets 2020 targets for urban population growth and registered urban residents.

March 15 – The central bank doubles the yuan currency’s daily trading band against the dollar.

March 11 – Central bank governor Zhou Xiaochuan says China’s deposit rates should be liberalized in one to two years.

March 11 – Development of 3-5 privately-owned banks to be tested in Tianjin, Shanghai, Zhejiang and Guangdong, bank regulator says.

March 11 – The cabinet outlines its healthcare reform plan.

March 7 – Loss-making solar equipment maker misses interest payment in China’s first domestic bond default.

March 5 – Premier Li Keqiang promises to wage a “war” on pollution and reduce the pace of investment to a decade-low.

March 1 -Simplified corporate capital registration comes into force. Government data later show 309,500 new firms were registered in March, up 46 percent from a year earlier.

FEBRUARY, 2014

Feb 26 – Beijing details pension reform that seeks to decrease urban-rural economic divisions before 2020.

Feb 21 – The central bank gives operational details for cross-border yuan deals made through Shanghai free trade zone.

Feb 20 – Sinopec Corp, Asia’s largest oil refiner, says it will sell up to 30 percent of its retail business to private investors in a multi-billion dollar revamp.

JANUARY, 2014

Jan 29 – The cabinet sets up a cross-ministry group to boost development of three service zones in Guangdong province.

Jan 22 – Six teams to supervise economic reforms are set up, with President Xi Jinping and Premier Li Keqiang in charge.

Jan 17 – China’s wealthy eastern province of Zhejiang became the first to implement changes to the one-child policy.

Jan 6 – The cabinet publishes guidelines strengthening regulation of off-balance lending.

DECEMBER, 2013

Dec 11 – Beijing strips 82 powers away from central government ministries. Over 200 administrative approvals are set to be abolished or delegated to local authorities in 2014.

Dec 10 – New standards on performance ratings of officials break the obsession with growth and include such criteria as work safety, innovation, environmental and resource costs.

Dec 8 – The central bank sets guidelines for issuing of interbank certificates of deposit, a step towards allowing markets to determine interest rates.

Dec 4 – The government expands its value-added tax trial to rail transport and the postal service.

Dec 4 – The central bank announces details of financial reform test runs in the Shanghai free trade zone.

NOVEMBER, 2013

Nov 30 – The stock market regulator announces IPO reforms.

Nov 12 – Anhui province, which spearheaded land reform in 1978 announces pilot land reforms, including accelerating the development of large-scale farming, completing land use rights registration before end-2015 and simplifying land transactions.

via Factbox: China’s reform tally since November 2013 policy meeting | Reuters.

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