Archive for ‘Economics’

19/10/2014

Made in Vietnam Looks Better and Better for Chinese Shirt Maker – Businessweek

In May, a long-simmering territorial dispute between China and Vietnam turned particularly hot. With Chinese and Vietnamese ships confronting one another in the South China Sea (known in Vietnam as the Eastern Sea), Vietnamese protesters furious with China went on a rampage at home. They attacked companies with Chinese workers or Chinese names, including businesses that were owned not by mainlanders but by companies from Taiwan or other places in Asia.

A TAL Apparel employee at the company’s factory in Hong Kong

Despite worries that the anti-Chinese violence would hurt Vietnam’s ability to attract investment dollars from overseas, the unrest hasn’t dissuaded a major Hong Kong-based manufacturer from making Vietnam its top focus for growth. TAL Group is one of the world’s biggest producers of menswear, selling shirts to brands such as Brooks Brothers, L.L.Bean, Eddie Bauer, and Burberry (BRBY:LN). One out of every six dress shirts sold in the U.S. comes from a TAL Group factory, the company says. Today, Vietnam accounts for only 12 percent to 15 percent of its production, but in two years that percentage should grow to 25 percent, according to TAL Chief Executive Officer Roger Lee.

The company’s commitment to Vietnam isn’t limited just to making garments. TAL is also investing in a new business to make textiles in the country. “We believe in Vietnam,” Lee says.

via Made in Vietnam Looks Better and Better for Chinese Shirt Maker – Businessweek.

19/10/2014

A pocket guide to doing business in China | McKinsey & Company

A pocket guide to doing business in China

McKinsey director Gordon Orr goes behind the trends shaping the world’s second-largest economy to explain what companies must do to operate effectively.

October 2014 | byGordon Orr

China, a $10 trillion economy growing at 7 percent annually, is a never-before-seen force reshaping our global economy. Over the past 30 years, the Chinese government has at times opened the door wide for foreign companies to participate in its domestic economic growth. At other times, it has kept the door firmly closed. While some global leaders, such as automotive original-equipment manufacturers, have turned China into their single largest source of profits, others, especially in the service sectors, have been challenged to capture a meaningful share of revenue or profits.

This article summarizes some of the trends shaping the next phase of China’s economic growth, which industries might benefit the most, and what could potentially go wrong. It also lays out what I believe it takes to build a successful, large-scale, and profitable business in China today as a foreign company.

via A pocket guide to doing business in China | McKinsey & Company.

03/10/2014

China Focus: Nation rises after 65 years of development – Xinhua | English.news.cn

One need look no further than China’s railways to see the enormous development of the country since its foundation on Oct. 1, 1949.

At the 65th anniversary of that formative moment, every Chinese citizen has access to a modern train service. In 1949, the nation’s railways extended only 22,000 km, with half the track in poor condition.

In comparison, the mileage had expanded to 100,000 km by 2013. More than 10,000 km was high-speed infrastructure, and another 12,000 km was under construction at that time.

This modernization is transforming the lives of Chinese people. For Tsering Dekyi, for example, his wish to send his children from their remote home to far-off schools for a better education is no longer a wild dream.

“I heard that the trains are very fast and safe. It takes only two hours from here to Lhasa. I really hope that my three kids will be able to attend schools in Lhasa or inland cities by train in the future,” Tsering Dekyi said from Xigaze City, some 200 km west of Lhasa in southwest China’s Tibet.

This is possible after an extension of the Qinghai-Tibet Railway was put into operation in August, linking Xigaze and Lhasa like never before.

Via the Qinghai-Tibet Railway, launched in 2006 as the world’s highest plateau rail track, Xigaze locals can even travel further off to major cities like Beijing and Shanghai.

Train track mileage is not the only data that makes clear the positive changes in China since 1949. In 2010, China overtook Japan to become the world’s second-largest economy. China is the world’s top goods trader. The nation also ranks third in global investment…

Meanwhile, the 2014 APEC Economic Leaders’ Meeting will come to Beijing in November, with leaders gathering in the Chinese capital to discuss important economic issues for the Asia-Pacific region. China will take center stage once more.

Behind the huge economic achievements made especially since the reform and opening-up policy was introduced in 1978, the nation has made huge, unprecedented strides in providing basic education and welfare for its population of 1.3 billion, the world’s largest.

Sixty-five years ago, a shocking 80 percent of the population were illiterate, but by 2008, free nine-year compulsory education programs were fully implemented across the country. This year, 7.27 million university students will graduate, marking a historical high.

Nutritious meals are being provided to students from poor families with billions of yuan budgeted each year by the government.

About 32.29 million rural students have benefited from the 46.23 billion yuan (7.52 billion U.S. dollars) in subsidies the central government has allocated since 2011, when it launched the nutrition improvement program. Also, more than 10 million university students have completed their studies after being granted student loans under programs adopted since 1999.

The 660 million people that China has lifted out of poverty since 1981account for more than 70 percent of the world’s total.

Meanwhile, the Chinese government has worked hard to provide basic healthcare for its people, with over 95 percent of the population covered by different sorts of healthcare programs by 2011.

However, there remain problems among the achievements, and they must be dealt with increasingly urgently. The issues include restraints on future development from the environment and resources, wide gaps between the wealthy and the poor, industrial overcapacity and imbalanced regional development.

Meanwhile, the Chinese economy must also brave challenges imposed from an economic slowdown after a boom over the past decade, as employment and structural control are key agendas for the government.

In order to cope, the Chinese leadership has showed political courage in pushing comprehensive reforms, including fighting corruption. Overhauls of administrative management, fiscal and financial systems are steadily being carried out as well.

There is no doubting the truth of Chinese President Xi Jinping‘s assertion that today’s China is nearer to its great goal of rejuvenation than at any period in history.

via China Focus: Nation rises after 65 years of development – Xinhua | English.news.cn.

02/10/2014

India launches campaign to boost manufacturing – Businessweek

India’s prime minister has launched a campaign to entice investment and promote the country as the world’s next cheap labor economy.


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The “Make in India” campaign is as much a slick marketing campaign as it is a promise to streamline bureaucracy and make India investor friendly.

Prime Minister Narendra Modi said at a launch event Thursday that “the whole world is ready to come here.”

India’s 1.2 billion people are anxious to see the economy expand and create more jobs. Some 13 million Indians become old enough each year to join the workforce.

Modi has been promoting India as the next manufacturing powerhouse. That’s a title long held by China, which is now growing wealthier and pushing toward becoming a consumer economy.

via India launches campaign to boost manufacturing – Businessweek.

02/10/2014

China’s $163 Billion R&D Budget – Businessweek

The amount of money China spends annually on research and development has tripled since 1995—reaching $163 billion in 2012, or 1.98 percent of GDP. As China cracks down on corruption elsewhere in government, so too has Xi Jinping’s administration turned greater attention to curtailing massive graft in research fields—including arresting top scientists and administrators suspected of skimming off the top. In June, for instance, Song Maoqiang, former dean of Beijing University of Posts & Telecommunications’ school of computer science and technology, was given a harsh 10-year prison term for embezzling $110,000 in research funds.

One component of China’s campaign to clean up corruption is requiring central government agencies to disclose their annual research budgets. In the Aug. 29 issue of the journal Science, two researchers—based at China’s Dalian University of Technology and the U.K.’s University of Nottingham—mined and compiled available budget information to “open [up] the ‘black box’ of China’s government R&D expenditures.”

Three agencies—the Ministry of Science and Technology (MOST), the Chinese Academy of Sciences (CAS), and the National Science Foundation of China (NSFC)—together were responsible for distributing nearly three-quarters of China’s research spending in 2011. The agencies dole out grants through both competitive, peer-reviewed proposal processes (sometimes aimed at achieving national goals or research priorities) and through more inscrutable, contract-based research. In general, the latter is more susceptible to corruption. Defense-related research usually falls into this category.

After combing through extensive records only recently made public, the Science authors, Yutao Sun and Cong Cao, could still not fully determine where all of Beijing’s research money has gone. “Slightly less than half (45.25%) of the central government R&D spending in 2011 is not accounted for,” they write, speculating that it is “likely spent at eight defense-related agencies that have not yet disclosed [their department annual reports].”

The authors calculate that in 2011, China devoted 4.7 percent and 11.8 percent of its total R&D budget to basic and applied research, respectively. That is a much lower percentage than in countries whose science and technology achievements Beijing hopes one day to rival, including the U.S. and Japan. In 2009, the U.S. spent 19.7 percent and 17.8 percent of total R&D budget on basic and applied research, respectively, and Japan spent 12.5 percent and 22.4 percent. “The low share of scientific research expenditure has negatively affected China’s innovation capability and may jeopardize China’s ambition to become an innovation-oriented nation,” the authors conclude.

via China’s $163 Billion R&D Budget – Businessweek.

02/10/2014

Facebook’s Mark Zuckerberg to Meet Modi in India – India Real Time – WSJ

Mark Zuckerberg, the founder of Facebook, will visit India next week to meet Prime Minister Narendra Modi and take part in a summit to find ways to get more people online–and probably signed up for his website.

India has around 200 million Internet users, a tiny fraction of its 1.2 billion population, and just over half of them have Facebook profiles. Mr. Modi is one of India’s most social-media savvy politicians and used Facebook and Twitter TWTR -3.04% heavily during his campaign ahead of elections which took place in April and May. But Internet use in general in India is still a minority affair with only 15% of the population online.

A report by McKinsey published Wednesday ahead of the internet.org summit which begins next Thursday said that between 2012 and 2013, the number of Internet users in India grew 22% compared to 9% growth in China and 7% increase in the U.S. over the same period. Over half (59%) of Internet users in India use mobile phones rather than computers to get online.

But, like Egypt, Indonesia, the Philippines and Thailand, India faces infrastructure challenges to getting more people online, the report said.

Almost half (45%) of the huge rural population has no access to electricity and further up the chain, the country is only in the early stages of deploying 3G networks.

There are some bright spots on the horizon for Internet usage in India however. The report says that India’s huge young population–around one in three people is currently aged under 15–will push the country online.

“We expect this younger age segment to be a significant driver of Internet adoption in developing countries, given their generally greater familiarity with technology and willingness to adopt it,” the report said.

via Facebook’s Mark Zuckerberg to Meet Modi in India – India Real Time – WSJ.

02/10/2014

Amazon to sell packaged food and beverages in India – Economic Times | Reuters

Online retailer Amazon.com Inc plans to sell packaged food and beverages in India from mid-October, the Economic Times reported, citing a person familiar with the matter.


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Amazon, which has already started accepting bookings for Coco-Cola Zero – the beverage’s low-calorie variant, will eventually start selling fresh food in India, the ET said. (bit.ly/1BAIAtJ)

Amazon is already in talks with brands like Kelloggs and Cornitos, the paper said.

Amazon India did not immediately respond to a request for comment.

Amazon, which opened its Indian website last June, has drawn up the battle lines by slashing prices, launching same-day delivery, adding new product categories and embarking on a high-voltage advertisement campaign.

In July, Amazon said it will invest a further $2 billion in India after the country’s largest e-tailer Flipkart attracted $1 billion of fresh funds, raising the stakes in a nascent but fast-growing e-commerce sector.

via Amazon to sell packaged food and beverages in India – Economic Times | Reuters.

30/09/2014

Education in China: Online learning is becoming more popular | The Economist

NEARLY 7m students began their courses at Chinese universities at the start of a new academic year this month. In line behind them, a new cohort is already cramming for next year’s university entrance-examination, the notorious gaokao. But some young Chinese see drawbacks in bricks-and-mortar tuition in China because of a rigid style of teaching, the funnelling of students into courses they do not enjoy, the cost and dim job prospects for many graduates. Small but growing numbers are considering options online.

Internet-based methods of teaching, known as Massive Online Open Courses or MOOCs, are already gaining in popularity in other countries. Typically, MOOCs offer students free access to instructional videos but charge for certificates showing satisfactory completion of coursework. In China, despite deeply ingrained reverence for traditional institutions, the trend is also beginning to catch on.

One startup in the field is a non-profit organisation in Beijing calling itself One-Man University. It is not officially recognised as a university, but it has gained a big leg-up with backing from non-state companies that see MOOCs as a potentially large new market. To attract viewers, 56.com, a video-streaming website, is distributing the service’s instructional videos without advertisements. Since it opened in 2011, One-Man University has acquired 130,000 registered members.

The organisation’s 27-year-old founder, Tong Zhe, studied physics at Peking University. He decided to offer online courses because he felt that the Chinese approach to higher education was too formulaic. Mr Tong’s 15-minute videos are prepared by professional teachers whose delivery is livelier than what is usually experienced in the dour lecture-halls of Chinese universities. Within three years Mr Tong aims to offer all university and high-school subjects. (The service’s name in Chinese, Wanmen Daxue, is a pun on the English that also means “ten thousand subjects”.)

Universities do not seem opposed to the idea. The principal of Southern University of Science and Technology, Zhu Qingshi, has said of One-Man University: “Education in the internet age can make everyone equal. I believe it will bring a revolution to education.” They are also getting into the business themselves. The government has allowed a first wave of open online courses—such as those provided by Xuetang, a MOOC supported by Tsinghua University—to be hosted on EdX, a non-profit platform, which is sponsored by Harvard and MIT. In May Chen Jin, Nanjing University’s president, said the university intended to work with Coursera, an American MOOC provider which has signed a deal with NetEase, a Chinese distributor, to host online courses.

via Education in China: Online learning is becoming more popular | The Economist.

30/09/2014

Water consumption: A canal too far | The Economist

THREE years ago the residents of Hualiba village in central China’s Henan province were moved 10km (six miles) from their homes into squat, yellow houses far from any source of work or their newly allocated fields. These days only the very young and very old live there. Close to their old farms, a giant concrete canal now cuts a swathe. From October 31st the channel will gush with water flowing from China’s lush south to the parched north.

The new waterway is part of the biggest water-diversion scheme in the world: the second arm of what is known as the South-North Water Diversion Project. This is designed to solve an age-old imbalance. The north of China has only a fifth of the country’s naturally available fresh water but two-thirds of the farmland. The problem has grown in recent decades because of rapid urban growth and heavy pollution of scarce water supplies.

The result is a chronic shortage. The World Bank defines water scarcity as less than 1,000 cubic metres (35,300 cubic feet) of fresh water per person per year. Eleven of China’s 31 provinces are dryer than this. Each Beijing resident has only 145 cubic metres a year of available fresh water. In 2009 the government said that nearly half the water in seven main rivers in China was unfit for human consumption. All this has encouraged ever greater use of groundwater. Much of this is now polluted too.

In 1952 Mao Zedong suggested the north could “borrow” water from the south. After his death China’s economic boom boosted demand for such a scheme and provided the cash to enable it. In 2002 the diversion project got under way. An initial phase was completed last year. This involved deepening and broadening the existing Grand Canal, which was built some 1,400 years ago, to take 14.8 billion cubic metres of water a year more than 1,100km northward from the Yangzi river basin towards the port city of Tianjin.

In late October the second, far more ambitious and costly route is due to open. This new watercourse, over a decade in the making, will push 13 billion cubic metres of water more than 1,200km from the Danjiangkou dam in the central province of Hubei to the capital, Beijing. The aim is to allow industry and agriculture to keep functioning; already in 2008 Beijing started pumping in emergency supplies from its neighbouring province, Hebei. The new canal will help avert an imminent crisis. But the gap between water supply and demand will remain large and keep growing.

The transfer will supply about a third of Beijing’s annual demand. A spur of the canal will provide an even greater proportion of Tianjin’s. But these shares will shrink over time. Even if people use less water, population growth, the expansion of cities and industrialisation will increase China’s overall demand. By lubricating further water-intensive growth the current project may even end up exacerbating water stress in the north.

Shifting billions of cubic metres across the country has caused huge disruption. The government says it has moved 330,000 people to make way for the central route. Laixiang Sun of the University of Maryland in America reckons the number uprooted is at least half a million. There will also be health and environmental costs. Diverting river-water northward could promote the spread of diseases common in the south, particularly schistosomiasis, a debilitating snail-borne disease. Reduced flow in the Yangzi may make coastal water supplies vulnerable to intrusion by seawater and increase the potential for drought.

The financial cost is also high. Mr Sun puts the cost of the project at more than $62 billion—far higher than the original $15 billion price tag. His estimate does not include the running of the project or the building of 13 new water-treatment plants to clean the water.

By increasing supply, the government is failing to confront the real source of the problem: high demand for water and inefficient use of it. Chinese industry uses ten times more water per unit of production than the average in industrialised countries, according to a report by the World Bank in 2009. A big reason for this is that water in China is far too cheap. In May 2014 Beijing introduced a new system that makes tap water more expensive the more people use. But prices are still far from market levels. Officials turn a blind eye to widespread extraction of un-tariffed groundwater by city dwellers and farmers, despite plummeting groundwater levels.

Raising the price would cut demand and encourage more efficient use. It should also help lure industry away from water-scarce areas where prices would be set at higher rates. Arid areas that are forced by the government to pipe water into desiccated cities like Beijing could offset their losses by charging higher tariffs.

via Water consumption: A canal too far | The Economist.

30/09/2014

Obama-Modi Meeting Offers Chance to Reset U.S.-India Ties – Businessweek

President Barack Obama and Indian Prime Minister Narendra Modi’s meetings in Washington give the two leaders to chance to reinvigorate an economic relationship that both see crucial to growth and security.

Indian Prime Minister Narendra Modi

The two days of talks, which began with a private dinner for Modi at the White House last night, are pivotal, U.S. officials said ahead of the summit. In addition to Obama’s sessions with Modi, Vice President Joe Biden and Secretary of State John Kerry will host today a luncheon for the Indian leader.

This is the first time Obama and Modi have met, and it also is Modi’s first visit to the U.S. since he was denied a visa in 2005 over anti-Muslim riots in his state of Gujarat three years earlier. Modi won a landslide election win in May, and the U.S. is seeking to repair relations while India is wooing foreign investors to revive its economy.

“The U.S. is eagerly trying to move forward with Modi in order to put the past behind them,” Milan Vaishnav, an associate in the South Asia program at the Carnegie Endowment for International Peace in Washington, said in a phone interview. “The two sides have a foundation in terms of a bilateral government-to-government relationship and a people-to-people relationship to build on. In terms of a leader-to-leader relationship, this is almost like starting anew.”

via Obama-Modi Meeting Offers Chance to Reset U.S.-India Ties – Businessweek.

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