Archive for ‘Economics’

17/09/2014

Will Chinese President Xi be able to compete with Japan’s Abe for India’s affections?

Any adjustments in the India-China-Japan triangle will have an impact all across Asia.

East Asia has eagerly set out to court New Delhi’s new government. That’s obvious from the spate of state visits that have taken place of late between India, China and Japan. Earlier this fortnight, Prime Minister Narendra Modi visited Japan. Today, Chinese President Xi Jinping’s begins his first official state visit to India. Trade, investment and infrastructure are the buzzwords on the road towards deepening ties.

The complexities of the India-China-Japan triangle are far too intricate to be spelt out in a simplistic fashion. Will trade and investment become the motive force that will fashion ties, more so at the cost of pressing strategic realities that appear conflicting at times? Going by the school of interdependent liberalism, states will be propelled to adopt a cooperative framework by economic symbiosis and the web of multilateral international institutions and frameworks.

In the case of China, India and Japan, while investments  have taken precedence, the competitive race is far too obvious. Last fortnight, Japanese Prime Minister Shinzo Abe announced that this country’s private and public investment in India will double to $34 billion over the next five years. Within a fortnight comes Xi Jinping with his administration’s plans to invest around $500 billion overseas in the next five years, with big-ticket investments coming India’s way likely to exceed $200 billion. It is being suggested that China could spend $35 billion merely on power and highway projects ‒ almost the same amount as Japan’s total investment in India.

Growing trade deficit

It is apparent that cooperation through economic considerations has its share of hidden problems. India continues to be hurt by  the growing trade deficit with China, which stood at a record $ 36 billion in 2013-’14. In fact, China accounted for more than 50% of India’s current account deficit in 2012-’13. Indian exports to its neighbour fell nearly 10% during that period.

By seeking economic and military clout, could China reject the liberal regional order and seek to replace it with its own Sino-centric Asian order? China’s much-debated rise is always under scrutiny, given its role as Asia’s largest economy and the fact that it is the No. 1 trading partner for almost 120 economies around the world.

More so, in the strategic sphere, are Asian nations, including India and Japan, prepared to recognise such an order? So profound is the presence, rise and status of the People’s Republic of China that one is often confronted with a debate whether a potential Asian century could actually become a Chinese century.

The Chinese government chose to downplay Modi’s earlier indirect reference to China during his visit to Japan, where he took a swipe at the “18th century expansionist mindset of some countries”. But the reaction of state-controlled Chinese media over Modi’s remark was noticeably irate. Chinese media fervently cautioned against any attempt by Tokyo to structure a united front against Beijing with New Delhi as its pivot. All this very palpably falls into the realist paradigm of international relations, which posits that states often find themselves in a zero-sum contest for power and influence, where the prevailing international power balance remains a key determinant of the region’s future stability and strategic order.

Geo-strategic realities

Realignments in any part of the India-China-Japan security triangle will have far-reaching impact all across Asia. It should be remembered that Xi Jinping’s address at the 18th Party Congress of the Chinese Communist Party in 2012 contained a reference to “rejuvenating China”, which has been interpreted as an oblique reference to “reclaiming lost historical territories”. This approach could well have a direct bearing on Japan and India, with whom China contests territories and borders.

On another level, the camaraderie between Modi and Shinzo Abe speaks volumes. Systemic conditions present a favourable platform for the duo to guide their countries to “… the dawn of a new era in India-Japan relations”, as they agreed to in the Tokyo Declaration last fortnight. Moreover, providing cement for this approach, Modi underlined the significance of India and Japan being democracies, which affords them a solid basis to converge at various levels on the Asian stage. As for the ties between China and Japan, there could not have been a worse time for relations between them, with the bitter contest over the East China Sea amidst a rising tide of nationalist sentiment against one another in both countries.

Whether Xi Jinping will manage to find success in making inroads into Delhi and buying a sizeable share of Indian attention is too early to say. However, one thing is for sure ‒ it will not happen at the cost of Japan.

via Scroll.in – News. Politics. Culture..

17/09/2014

Is China’s promised $100 billion India investment more dangerous than its border policy?

Experts believe that China deliberately uses trade as part of its geo-strategic arsenal.

The script is almost predictable. Right before meetings of Indian and Chinese heads of state, something happens on the border to remind everyone that sentiment between the two countries is not exactly neighbourly. Last year it was a standoff in Daulat Beg Oldi about infiltration by the Chinese army. This year, with everyone excited at China’s promise to pump $100 billion into India, there’s another incursion by the Chinese into Demchok in Ladhak.

Chinese President Xi Jinping arrives in India today and will visit Ahmedabad on Prime Minister Narendra Modi’s birthday. But Chinese troops have also been reported to have moved 500 meters into Indian territory.

Beijing’s approach seems to be sweet-talking – this time taking the form of foreign direct investment – coupled with regular pinpricks that remind India that they have the stronger position on the border.

But could the proposed investment be as much of a threat to India as the border dispute?

Trading places

India’s total trade with China was around $65 billion in 2013-’14. Of that, only $14 billion were Indian exports heading into China, leaving India with a trade deficit of $36 billion. If oil imports are included, Chinese imports are responsible for nearly half of India’s overall trade deficit. This is a great many Indian eggs in one Chinese basket.

For many economists, this isn’t a problem. It’s simply the way efficient markets ought to function, with India buying the goods it needs from the most competitive seller. “The more competitive the trading partner, the more India should buy from it, and the bigger should be the bilateral trade deficit,” wrote commentator Swaminathan Aiyar last year. “China is the most competitive exporter of all, so India should run its biggest trade deficit with this country.”

Yet India does feel the need to reduce the trade deficit with China. Answering a question in the Lok Sabha earlier this year, minister of state for commerce Nirmala Sitharaman admitted that the balance of trade was heavily in China’s favour and that India was taking steps to address this.

“With a view to reducing the trade deficit with China, efforts are being made to diversify the export basket,” Sitharaman said.

via Scroll.in – News. Politics. Culture..

16/09/2014

Xi’s India visit highlights changing power dynamic – Businessweek

Chinese President Xi Jinping’s trip to India this week highlights subtle shifts in the regional power dynamic that are bringing warmer ties between the two Asian giants, challenging China’s traditional relationship with Pakistan, and opening a new chapter in Beijing’s ongoing competition for influence with arch-rival Japan.

Xi is due in New Delhi on Wednesday for a three-day visit focused on trade, investment and the resolution of decades-old border disputes. With the world’s second-largest economy and a proven track record at building highways, railways, and industrial zones, China has much to offer India as it seeks to upgrade its creaky infrastructure.

The visit is the latest sign of easing suspicions between the two huge countries — which between them have 2.6 billion people — dating from a month-long border war in 1962 that left around 2,000 soldiers dead. That conflict ended in a standoff with both sides accusing the other of occupying its territory.

Xi’s visit “will definitely enhance the bilateral political mutual trust,” Chinese Assistant Foreign Minister Liu Jianchao told reporters in Beijing last week.

While ties have been steadily growing for years, they’ve been given a major boost under new Indian Prime Minister Narendra Modi, who’s signaled he wishes to pursue a more vigorous foreign policy. Xi is the first Chinese head of state to visit in eight years, while the country’s prime minister, Li Keqiang, made India his first overseas visit shortly after taking office last year.

“Good relations with India are a key part of China’s regional strategy and Xi’s visit creates the opportunity for direct face-to-face communication on the problems that still exist, such as the border issue,” said Zhao Gancheng, Director of the Asia-Pacific Center of the Shanghai Institute for International Studies.

via Xi’s India visit highlights changing power dynamic – Businessweek.

16/09/2014

Almost Half of China’s Rich Want to Emigrate – Businessweek

Even as the number of Chinese millionaires grows, the number of those aiming to leave China is getting ever larger.

A shopper at Lee Gardens mall in the Causeway Bay district of Hong Kong

About half of China’s wealthy are considering moving to a new country within five years, says a just-released report by U.K.-based bank Barclays. The survey of more than 2,000 individuals around the world, all with personal wealth over $1.5 million, showed Chinese are more eager to emigrate than the very well-off in any other region.

Forty-seven percent of rich Chinese planned to move abroad in the next half-decade. That compared with 23 percent in Singapore and 16 percent in Hong Kong. One-fifth of rich Brits intended to emigrate, while only 6 percent of Americans and 5 percent of Indians had that plan, reported the South China Morning Post today, citing the report.

Not surprisingly, given China’s high-pressure, exam-based school system, bettering children’s education and improving their future job prospects were named as the main reasons to emigrate by 78 percent of respondents. A better economic situation was mentioned by 73 percent, while health care and social services were cited by 18 percent; the U.S. and Europe were the favored destinations.

“The reality is that most ultra-high net worth individuals in China are probably making money in China right now,” noted Liam Bailey, head of residential research at London brokerage Knight Frank, in the report. “So, for business reasons, they need to be relatively close. That might prevent some of them going further afield.”

via Almost Half of China’s Rich Want to Emigrate – Businessweek.

16/09/2014

Give the public a role in Clean Ganga project, says Rajendra Pachauri

India’s holiest river is due for a clean-up, with Prime Minister Narendra Modi taking personal responsibility for restoring the Ganga and ridding the 2,500 km long river of industrial effluents and untreated sewage.

Uma Bharti, Modi’s minister for water resources and Ganges rejuvenation, has said the river would be clean in three years. Earlier this month, India’s Supreme Court asked the government for a roadmap on the project so that the court could monitor it.

Rajendra Pachauri, chairman of the U.N.’s Intergovernmental Panel on Climate Change (IPCC), spoke to Reuters on the Ganga project, the need for transparency and how the public could help.

via India Insight.

15/09/2014

India’s Economy Looks a Lot Like China’s — In 2001 – India Real Time – WSJ

India today doesn’t look quite like the economic dynamo that, just a few years ago, some predicted would overtake China as emerging-markets champion.

But the race looks a lot closer if you account for one key fact: China got a 13-year head start on India in opening its economy and giving companies greater freedom to invest and produce. In exports, capital spending and foreign investment, India today is remarkably similar to China circa 2001.

That should both console and concern India as it gets back on its feet after three years of weak growth and high inflation. Console, since it suggests the country’s economy could remain on a China-like trajectory for years to come. But concern, because India’s delay could mean that the country has missed out on some big advantages that catalyzed China’s boom.

The latter point is especially worth considering given how assiduously India’s recently elected prime minister, Narendra Modi, is working to follow the blueprint for China’s export- and investment-driven success.

When Chinese President Xi Jinping visits the Indian capital this week he will encounter a recipe for economic revival that ought to look very familiar. Delhi is aiming to boost exports and raise India’s share in world trade by 50% over the next five years. “Sell anywhere,” Mr. Modi said in an Independence Day exhortation to global business last month. “But manufacture here.”

via India’s Economy Looks a Lot Like China’s — In 2001 – India Real Time – WSJ.

15/09/2014

China on track to develop Indian railways as Xi heads to South Asia | Reuters

China will pledge to invest billions of dollars in India’s rail network during a visit by President Xi Jinping this week, bringing more than diplomatic nicety to the neighbors’ first summit since Narendra Modi became prime minister in May.

China's President Xi Jinping attends a meeting with Venezuela's President Nicolas Maduro at Miraflores Palace in Caracas in this July 20, 2014 file photo. REUTERS/Jorge Silva/Files

The leaders of Asia’s three biggest economies – China, India and Japan – have crisscrossed the region this month, lobbying for strategic influence, building defense ties, and seeking new business opportunities.

Beijing’s bid to ramp up commercial ties in India comes despite a territorial dispute that has flared anew in recent years, raising concerns in New Delhi, where memories of a humiliating border war defeat in 1962 run deep.

It follows a pledge by Japan to invest $35 billion in India over the next five years – including the introduction of bullet trains – and a drive to deepen security ties during talks earlier this month between Modi and Prime Minister Shinzo Abe in Tokyo.

India and China are expected to sign a pact that will open the way for Chinese participation in new rail tracks, automated signaling for faster trains and modern stations that India’s British-built rail system desperately needs, having barely added 11,000 km of track in the 67 years since independence.

China, which added 14,000 km of track in the five years to 2011, is also pushing for a share of the lucrative high-speed train market in India, which it says would be cheaper than Japanese proposals.

“India has a strong, real desire to increase its cooperation with China and other countries to perfect and develop its rail system, and has concrete cooperation ideas,” Assistant Chinese Foreign Minister Liu Jianchao told reporters ahead of Xi’s trip.

“India is considering building high-speed railways, and China has a positive attitude towards this.”

China’s consul general in Mumbai, Liu Youfa, told the Times of India last week that Chinese investment in the modernization of India’s railways could eventually touch $50 billion.

Beijing is looking to invest another $50 billion in building India’s ports, roads and a project to link rivers, part of an infrastructure push that Modi has said is his top priority to crank up economic growth.

Chinese investment will also help narrow a trade deficit with India that hit $31 billion in 2013.

via China on track to develop Indian railways as Xi heads to South Asia | Reuters.

15/09/2014

With eye on China, Modi’s India to develop disputed border region | Reuters

India has eased restrictions on building roads and military facilities along its disputed border with China, as the new government seeks to close the gap on its neighbor’s superior transport network and take a stronger stance on Beijing.

Indian environment minister Prakash Javadekar told Reuters he had relaxed environmental rules within 100 km (62 miles) of the contested border in remote Arunachal Pradesh in order to speed up construction of some 6,000 km of roads.

The move, which also allows for the construction of army stations, arms depots, schools and hospitals in the sparsely populated Himalayan region, was announced days before Chinese President Xi Jinping visits India on Sept. 17-18.

“This is about defense preparedness,” said Javadekar. “On the Chinese side of the border, not only have they built good roads, they are building up their railway network. Our army faces problems because of the bad quality of roads,” he added.

Work on the roads will start in the coming months.

via With eye on China, Modi’s India to develop disputed border region | Reuters.

12/09/2014

Schumpeter: The China wave | The Economist

MANAGEMENT thinkers have paid surprisingly little attention to how Chinese firms are run. They routinely ascribe those firms’ rapid growth in recent years to their copious supply of cheap labour, or to generous financial backing from the state, rather than inventiveness. They have much more time for India, particularly its knack for frugal innovation, with all those colourful stories of banks putting cash machines on bikes and taking them into the countryside, and companies building water purifiers out of coconut husks.

However, it seems unlikely that China’s companies have come as far as they have just by applying lots of labour and capital. It is also hard to imagine that the huge expansion of China’s education system and its technology industries is not producing fresh management thinking. Western companies knew little about Japan’s system of lean production until its carmakers gobbled up their markets. The danger is that the same will happen with Chinese management ideas.

There are, however, signs that these are now getting the attention they deserve. The MIT Sloan Management Review devotes much of its current issue to examining innovation and management lessons from China. Peter Williamson and Eden Yin of Cambridge University’s Judge Business School contribute a fascinating essay on “Accelerated Innovation: the New Challenge from China”. The latest issue of the Harvard Business Review has a piece on “A Chinese Approach to Management” by Thomas Hout of the Monterey Institute of International Studies and David Michael of the Boston Consulting Group.

The first article suggests that the Chinese, like the post-war Japanese, have been doing a great deal of innovation under the radar. The second demonstrates that they are becoming more creative as they seek to solve the problems of a rapidly advancing consumer economy.

Messrs Williamson and Yin focus on the way that many Chinese companies are using mass-production techniques to speed up not just the manufacture but also the development of products. They break up the innovation process into a large number of small steps and then assign (often sizeable) teams to work on each step. For example, WuXiAppTec, a drug company, divided the search for a new treatment for chronic hepatitis C into eight steps, assigning dozens of people to each. The firm also adapted German software that was designed for managing assembly lines to co-ordinate the innovation process. Whereas a Western software firm typically releases an early “beta” version of a product only to a select group of guinea-pigs, Chinese firms are more likely to launch theirs straight into the market: they use consumers as co-creators, seeking their feedback and then rapidly adjusting their products.

This sort of accelerated innovation may not generate stunning breakthroughs. But that is not what it is for. China’s success has depended on its ability to be a “fast follower”, copying foreign ideas and turning them into mass-market products. Messrs Williamson and Yin argue that the Chinese can now apply accelerated innovation in lots of areas; and that the technique helps them make better use of one of the country’s most important resources—a pool of competent but unexceptional technicians.

Messrs Hout and Michael are also struck by Chinese companies’ emphasis on speed, and their willingness to throw things at the market. Goodbaby, which makes prams and car seats, introduces about 100 new products each quarter. Broad Group, a construction firm, puts up buildings rapidly by breaking them up into modules, fabricating those modules in factories, pre-loaded with utilities, and then plugging them together: an idea long talked about in the rich world but not much implemented.

However, their paper’s focus is broader—on how Chinese entrepreneurs are coping with the speed at which technology-related industries are changing. They note that even big companies delegate lots of authority to preserve flexibility: Haier, a home-appliances giant, consists of thousands of mini-companies, each of which reports directly to the chairman. That is an interesting contrast with Japanese firms’ obsession with seniority and consensus-building.

Messrs Hout and Michael also highlight the creativity of some Chinese companies when faced with the need to build entire ecosystems out of thin air, from supply chains to labour pools. Hai Di Lao, a hotpot restaurant chain, deals with one of its biggest problems—recruiting and retaining young people to train as branch managers—by offering them housing, schooling for their children and trips abroad. This sort of imaginative thinking on how to attract good workers will increasingly be needed now that China has used up most of its surplus rural labour.

via Schumpeter: The China wave | The Economist.

12/09/2014

When China Cleans Its Air, Health-Care Costs Plummet – Businessweek

Beijing residents checking the hourly air-quality index online and strapping air-pollution facemasks on their children may miss the halcyon days just before the 2008 Olympics, when the city temporarily cleaned up its skies (at least, relatively speaking). But not every city in China has seen the air grow darker over the past half decade.

Unidentified emissions from a coal-fired power plant in Taiyuan, Shanxi, China, in 2007

The northern city of Taiyuan, capital of coal-rich Shanxi province, has launched several measures to reduce coal burning and emissions. Although its skies are hardly clear, they are clearer. And that has made a noticeable difference in health outcomes and health-care costs, according to a new study published in the journal Environmental Health.

Over the past decade, Taiyuan has closed several large coal-burning power plants and increased environmental monitoring of its other factories—effectively lowering the average concentration of PM 10 (particulate matter 10 micrometers in diameter or less). As a result, average PM 10 concentrations dropped more than 50 percent from 2001 to 2010.

The economic costs associated with pollution—including health-care expenses, loss of labor productivity, and premature death—correspondingly dropped more than 50 percent, according to estimates by the researchers. Specifically, the researchers correlated reduced air pollution over the course of a decade with 141,457 fewer hospital or doctor visits, 31,810 fewer hospital stays, 969 fewer trips to the emergency room, 951 fewer cases of bronchitis, and 2,810 fewer premature deaths.

via When China Cleans Its Air, Health-Care Costs Plummet – Businessweek.

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India