Posts tagged ‘Economic growth’

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01/06/2013

China’s Lopsided Labor Force

BusinessWeek: “While a dwindling number of migrant laborers is helping drive up salaries in China’s assembly-line industries and other low-skilled employment categories, a surplus of college graduates for available white-collar jobs is eroding the bargaining power of those with university degrees.

Students preparing for the college entrance exam in China's Sichuan province

Wages have been steadily rising for China’s 260 million migrant workers—who take jobs in factories, on construction sites, in restaurants, and in other sectors with minimal entry requirements. According to the government-led All-China Federation of Trade Unions, the average monthly earnings of migrant workers across China rose 11 percent from 2011 to 2012, to 2,290 renminbi ($370). That exceeds the rate of China’s GDP growth.

Meanwhile, as central-government investment has allowed China to increase university enrollment and graduation rates massively, the demand for college graduates has not kept up. The number of university degrees awarded annually has risen fourfold in a decade, to about 8 million today.

Among those new graduates who did find employment last year, 69 percent had starting salaries that paid less than 2,000 renminbi per month—in other words, their jobs paid them less than they might have earned as migrant laborers, according to figures reported by a the 21st Century Business Herald newspaper on Tuesday.

Those grim numbers won’t, however, dent the hopes of millions of high-school seniors who will be taking China’s three-day college entrance exam the first week in June. The exam, called gaokao, is widely criticized for stressing rote-memorization skills over critical thinking. Critics have called for reforming the test for years, but for now, it’s still a key hurdle—the first of many—for students aspiring to steady jobs and a middle-class life.”

via China’s Lopsided Labor Force – Businessweek.

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Posted in China alert, Economics, graduate, higher education, labour shortage, Migrant workers, Politics, temporary workers | Leave a Comment »

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01/06/2013

India’s economic growth at slowest rate in a decade

BBC: “India‘s economy grew at its slowest pace in a decade during the 2012-13 financial year, figures show.

An factory worker welds at an air conditioner manufacturing facility near Ahmedabad

The economy grew by 5% over the year, after having grown at an annual pace of 4.8% in the January-to-March quarter.

India was recording annual growth of 9% until two years ago, but in recent months it has seen a sharp decline blamed on a slowdown in its manufacturing and services sectors.

Foreign investors have also kept away due to delays in key reforms.

One factor is India’s weakening job market.

“Companies now want a perfect candidate. Because of the global recession they are cutting down the job opportunities.”

Falling orders and fewer jobs

According to the latest figures released by the ministry of statistics, India’s manufacturing sector grew at an annual pace of 2.6% during the latest quarter while farm output rose by just 1.4%.

The figures are in line with official estimates. In February, India lowered its growth forecast to 5% for the year, underlining the challenges it faced in reviving the sluggish economy.

Last month, Prime Minister Manmohan Singh said the current downturn was “temporary” and he was confident the country’s economy would bounce back to an “8% growth rate”.

However, the mood has remained pessimistic in the business community with industry leaders worried over high rates of inflation.

The slowing economy has also meant that Indian companies are putting less profit back into their businesses.

Annual capital investment growth slowed to 3.5% in the first three months of 2013, down from 4.5% year-on-year in the previous quarter.

Meanwhile, complex business regulations are often blamed for driving foreign companies away.

Foreign direct investment into India has fallen, while the amount of corporate money leaving the country is on the rise.

“The government needs to go all-out to turn around investment sentiment,” said Yes Bank chief economist Shubhada Rao.

via BBC News – India’s economic growth at slowest rate in a decade.

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14/05/2013

* An addiction that could spell economic disaster

The Times: “Fund managers who between them control more than $1 trillion in assets were warned yesterday that China was in the grip of a debt addiction that could destabilise its financial system.

Traditional houses in the shadow of new high-rise apartment blocks in Shanghai

Speaking at the annual CLSA China Forum in Beijing, Francis Cheung, the brokerage’s China head, said that the country was hooked on an “unsustainable” pace of growth requiring ever-greater injections of debt to keep going.

Fifty per cent of the Chinese econ-omy is made up of investment, an unprecedented level for a country at its stage of development, sucking in increasing amounts of credit, effectively to buy growth.

Total debt in the world’s second-largest economy soared from 148 per cent of gross domestic product in 2008 to 205 per cent of GDP last year and is expected to hit 245 per cent by 2015, Mr Cheung said in a report.

But despite the rising tide of investment being poured in to build everything from houses and roads to railways and power plants, China’s credit habit is becoming less effective, with the same amount of debt generating lower returns every year.

China’s annual GDP growth has almost halved from 13 per cent in 2007 to an expected 7.5 per cent this year, while total debt has more than doubled in the same time, a development model that President Xi Jinping also has called “unsustainable”.

“China is running just to stand still … China is not a rich country; it is a lot of debt for a country at this GDP level. What I worry about is unregulated lending,” Mr Cheung told the forum.

With Chinese industry suffering from overcapacity in every sector from steel to cement to solar panels, the country “cannot use any more stimulus policies to boost growth”.

The fastest-growing debt is that shouldered by local governments, with the undisclosed sum estimated to have hit 20 trillion yuan (£2 trillion) last year — a doubling in two years. Local governments are being forced to pay more to service their debts, while their ability to raise money through selling land is slowing.

The biggest risk, Mr Cheung said, came from the growing use of unregulated loans generated by “trust companies”, financial sector intermediaries that make money from offering risky loans known as “wealth management products” to private companies unable to get credit from state-run banks.

A report published by Moody’s yesterday found that China’s “shadow banking” sector had hit an estimated 29 trillion yuan (£3 trillion) last year, posing a “systemic risk” to the financial system, despite a partial clampdown in March. The credit ratings agency also warned of the threat of contagion, stemming from little-regulated shadow lending that has swollen by 67 per cent in the past two years.

Last month China sudffered its first sovereign credit rating downgrade in 14 years as Fitch lowered its appraisal amid fears that its debt problems would necessitate a government bailout.”

via An addiction that could spell economic disaster | The Times.

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07/03/2013

* China faces social, financial risks in urbanization push

See also today’s reblog from China Daily Mail about the property bubble.

Reuters: “China’s urbanization drive could fuel social unrest over land disputes and pose financial risks if money is thrown around recklessly, a senior communist party official and a leading economist said on Thursday.

Wang Baiqiang prepares to go to work at a shoe factory in Yangzhou, Jiangsu Province February 18, 2013. REUTERS-Carlos Barria

Shifting people from the countryside to cities is a policy priority for China’s new leaders as they seek to sustain economic growth that last year slowed to a 13-year low of 7.8 percent. The government hopes 60 percent of China’s population of almost 1.4 billion will be urban residents by 2020.

The urban population jumped to above 700 million from less than 200 million in the previous three decades, but that explosion has triggered sometimes violent clashes over expropriation of farmland for development as well as water shortages, pollution and other problems.

“These are severe challenges as we are trying to sustain the urbanization process,” said Chen Xiwen, head of the Office of Central Rural Work Leading Group, the top body which guides China’s farm policy. “Many people have worries and such worries are understandable,” he told a news conference on the sidelines of China’s annual parliament session.

The government must protect farmers from losing their land in the process as local governments have been relying heavily on land sales to finance local investment, Chen said. “If the urbanization process becomes a process of depriving and harming farmers’ interests, it cannot be sustained and society cannot maintain stability.”"

via China faces social, financial risks in urbanization push | Reuters.

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04/03/2013

* China: The next phase of growth

China Policy Institute: “As the new Chinese leadership takes over, their biggest economic challenge remains generating growth for another 30 years. In addition to re-balancing the economy and stimulating more productivity, a key aspect will be the re-defining the role of the state. After over 30 years of marketisation and reform, China remains a mixed picture of state-led policies and a growing number of facially neutral laws with some exemptions for state-owned enterprises.

lyuIn addition, the state-owned commercial banks continue to benefit from official “financial repression” policies, such as the preservation of a spread between lending rates and deposit rates. It helps to generate margins for banks and facilitate their recapitalisation. This policy also enables the state-owned commercial banks to continue to support government policies ranging from fiscal stimulus to supporting state-owned enterprises, though not without cost to overall economic growth as financial repression distorts the allocation of capital.

The high levels of capital formation (some 40% of GDP) in the past two decades and the inefficient allocation of capital away from more productive private firms are worrying. The Twelfth Five Year Plan (2011-15) plans to re-balance the economy towards greater domestic demand and less of a reliance on exports. A key part of the plan is to increase consumption and other parts such as more urbanization and services development would support investment in developing larger urban areas where migrants can settle and government services can be dispersed more efficiently.

This plan in actuality has an implicit 30 year time horizon as these policies of migration, urban development and boosting consumption cannot be achieved in a short time period. Unless China can re-orient its growth model including towards more efficient investments by private firms, then it could find it difficult to sustain a strong growth rate. Part of this challenge will include creating a more secure welfare state.”

via China Policy Institute Blog » The next phase of growth.

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01/03/2013

* China plans bond overhaul to fund $6 trillion urbanization

Reuters: “China plans major bond market reform to raise the money the ruling Communist Party needs for a 40 trillion yuan ($6.4 trillion) urbanization program to buoy economic growth and close a chasm between the country’s urban rich and rural poor.

A man walks past a construction site for a new stadium in Mentougou district, suburb of Beijing February 28, 2013. REUTERS-Kim Kyung-Hoon

The Party aims to bring 400 million people to cities over the next decade as the new leadership of president-in-waiting Xi Jinping and premier-designate Li Keqiang seek to turn China into a wealthy world power with economic growth generated by an affluent consumer class.

The urban development would be funded by a major expansion of bond markets, sources with leadership ties, and a senior executive at one of China’s “Big Four” state banks, who was formerly at the central bank, told Reuters.

“The urbanization drive will push the domestic capital market liberalization agenda,” the senior bank executive said on condition of anonymity. “Urbanization is Li Keqiang’s big project. He has to get it right and he is willing to pursue innovation to make it a success.”

Set to be confirmed as premier at the end of the annual meeting of China’s rubber-stamp parliament, which opens next week, Li must find ways to pay for the urban development that he has made a policy priority.

Central and local governments, as well as bank loans, will fund the costs, the sources said. But, sweeping reforms to create a fully-functioning municipal bond market, boost corporate and high-yield bond issuance and actively steer foreign capital into the sector, are crucial to raising the sums of money China will need, they added.

Despite its ranking as the second-largest economy globally after three decades of stellar growth, China remains an aspiring middle-income country riven with inequality and dependent on state-backed investment.

“If we continue to walk down the path of government spending, it’ll be like wearing new shoes, but walking the old road,” a source with leadership ties said, requesting anonymity to avoid repercussions for speaking to foreign media without authorization.”

via Exclusive: China plans bond overhaul to fund $6 trillion urbanization – sources | Reuters.

Posted in Chindia Alert, Economics, urban development | 1 Comment »

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30/01/2013

* Indian Rupee at Over 3-Month High

Indian rupee collection

Indian rupee collection (Photo credit: Wikipedia)

WSJ: “The Indian rupee rose to its highest level in more than three months against the U.S. dollar Wednesday, tracking strong gains in the euro.

At 1005 GMT, the dollar was trading at 53.37 rupees, after falling to 53.35 rupees–a level not seen since Oct. 23. The dollar was at 53.76 in late Asian trade Tuesday.

The euro touched a fresh 13-month high of $1.35367 Wednesday.

The rupee benefited also from hopes of more monetary-policy easing by the central bank in 2013 to help boost economic growth which has slowed to its weakest in nearly a decade.

Tuesday, the Reserve Bank of India trimmed its key lending rate by a quarter-percentage point to 7.75%–the first rate cut in nine months–and said “it is critical now to arrest the loss of growth momentum.”

The RBI said its policy stance intends to “provide an appropriate interest rate environment to support growth as inflation risks moderate.”"

via Indian Rupee at Over 3-Month High – WSJ.com.

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31/08/2012

* India’s economic growth better than forecast

BBC News: “India’s economy grew faster than expected in the three months to the end of June, easing some fears about a sharp slowdown in Asia’s third-largest economy.

Growth was 5.5% in the April to June period from a year earlier. Most analysts had forecast a rate of 5.2%.

That compares with a 5.3% annual growth rate in the previous quarter.

However, there are concerns that a lack of reforms, slowing factory output and investment may hurt long-term growth.

“Whilst an upside surprise at 5.5%, the pace of growth is undeniably below potential and validates the need for the government to address sluggishness in investment and external sector activity,” said Radhika Rao an economist at Forecast Pte.”

via BBC News – India’s economic growth better than forecast.

Posted in Economics, Good news, India alert | 2 Comments »

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27/08/2012

* $135 – $12 = the pay gap the West can’t bridge

The Times: “We can’t compete with China on wages and are living beyond our means. We must retrench before we grow again

Two numbers — $135 and $12 — explain why Britain’s and Europe’s economies are stagnant or shrinking. Pundits and economists have lined up with suggestions about how to stimulate our economy: more quantitative easing; clever schemes such as “funding for lending”; while others say enough of austerity, let’s stop the cuts. But all that assumes that growth is the natural order of things.

None of these proposals will solve our problems because they ignore the two numbers $135 and $12. The first is what the average worker in the West earns per day; the second what the average worker in urban China earns.

This inequality in pay is the main reason our economy is in peril. What entitles the rich world’s 500 million workers to salaries ten times greater than the 1.1 billion workers in urban bits of the developing world who toil and study so much harder, let alone nearly 100 times greater than the 1.3 billion adults who live in rural poverty?

In the global marketplace it is now impossible to preserve well-paid jobs for Westerners. Many of those jobs have gone or are going south or east. In the 1950s the most successful company by market capitalisation was General Motors. In 1955 it employed nearly half a million Americans and 80,000 foreigners. Today Apple, the world’s biggest company, employs 4,000 Americans and more than 700,000 overseas contractors. And in jobs that have not moved, wages are under severe downward pressure: US high- school dropouts now earn less in real terms than their dropout grandfathers.

It was not always like that. For 55 years after the Second World War annual growth in jobs in Western economies was about 2 per cent and real wages grew by about 3 per cent year after year. The idea that we would all earn more without having to work harder, and that there would be jobs for our children, became a democratic “right”. But this right is now broken because, starting in 1990, developing nations ditched the failed socialist and Marxist policies that kept them poor. Since 2000 China’s economy has quintupled — while jobs, wages and GDP growth over the cycle for Western economies was, with few exceptions, negative.

For the first time in centuries we have to compete on a level playing field. We cannot compete on wages. Do we have other advantages that will protect our living standards? Aren’t Europe’s workers better educated? More creative? No: 10,000 science PhDs graduated from Chinese universities last year. In 1995, global patents granted to China amounted to 0.5 per cent of the total; in 2010 it had reached 9 per cent and is rising exponentially. Our best universities are educating many future business leaders and scientists of developing countries. Our advantage in physical and intellectual capital is eroding fast. What the developing world does not create, it can steal; the global value of counterfeit and pirated goods is forecast to rise by $1.5 trillion by 2015.

Most importantly, we consume more and invest less. China’s investment levels (however misdirected some of those investments may be) have risen to almost half of GDP, while the West is at about 15 per cent and falling. The truth is that Western nations have been living beyond their means. Our build-up in total debt — corporate, individual and government — has now become an enormous overhang. The UK is more indebted than Greece, Spain or Italy and only Japan and Ireland’s total debt per head is greater than ours.

So how do we get out of this mess?

…”

By Jon Moynihan, , 15 August 2012 | PA Consulting Group

via The Times – $135 – $12 = the pay gap the West can’t bridge, 15 August 2012 | PA Consulting Group.

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29/07/2012

* China waste water pipeline scrapped after protest

BBC News: “Authorities in China say a project to build a waste water pipeline in the city of Qidong has been scrapped after a protest over pollution.

Demonstrators took to the streets of the city, north of Shanghai, and ransacked local government offices. They said the pipeline, proposed as part of a paper-making company, would pollute their coastal waters.

China has seen rising anger about environmental damage after three decades of rapid economic growth.

The thousands of protesters overturned cars as well as storming the local government offices and throwing documents from the windows. Items which the protesters allege are often received as bribes by officials – such as wine – were also seized from the offices, reports say.”

via BBC News – China waste water pipeline scrapped after protest.

Yet another example that ‘people power’ is beginning to affect decisions by local authorities in China.

See also: 
http://chindia-alert.org/2012/07/03/china-factory-construction-halted-amid-violent-protests/

Posted in China alert, Ecology, Economics, Good news, Pollution, public protest | 2 Comments »

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