Archive for ‘Economics’

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15/04/2014

Massive China shoe factory strike rolls on as offer falls flat | Reuters

Thousands of workers at a giant Chinese shoe factory shrugged off an offer for improved social benefits on Tuesday, prolonging one of the largest strikes in China in recent years amid signs of increased labor activism as the economy slows.

Yue Yuen Industrial Holdings

Yue Yuen Industrial Holdings (Photo credit: Wikipedia)

The industrial unrest at Yue Yuen Industrial (Holdings), now stretching to around ten days and sparking sporadic scuffles with police, has centered on issues including unpaid social insurance, improper labor contracts and low wages. Workers have demanded improved social insurance payments, a pay rise and more equitable contracts.

“The factory has been tricking us for 10 years,” said a female worker inside a giant industrial campus in Gaobu town run by Yue Yuen in the southern factory hub of Dongguan in the Pearl River Delta. “The Gaobu government, labor bureau, social security bureau and the company were all tricking us together.”

A spokesman for Yue Yuen said the firm, which makes shoes for the likes of Nike, Adidas, Reebok, Asics and Converse with a market capitalization of some $5.59 billion, had agreed to an improved “social benefit plan” on Monday, while stressing the business impact had been “mild” so far.

“Basically, the terms that we announced yesterday was after a very thorough internal analysis and calculation and considering all the factors including the affordability from the factory perspective,” the spokesman told Reuters by phone.

via Massive China shoe factory strike rolls on as offer falls flat | Reuters.

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11/04/2014

All you need to know about business in China | McKinsey & Company

A lot of people view China business as mysterious. Relax. Consumers behave pretty much the same everywhere. Competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends (exhibit). That’s it. Six trends shape most of the country’s industries and drive much of China’s impact on the Western world. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable.

Coauthors Jeffrey Towson and Jonathan Woetzel discuss China’s six megatrends with Nick Leung, the managing partner of McKinsey’s Greater China office.

These trends move businesses on a daily basis. They’re revenue or cost drivers that show up in income statements. Deals, newspaper headlines, political statements, and the rising and falling wealth of companies are mostly manifestations of these six trends, which aren’t typically studied by economists and political analysts. In fact, we happen to think that Chinese politics or political economics are wildly overemphasized by some Westerners in China. So let’s tell a story about each of these megatrends, with some important caveats. They’re not necessarily good things. They’re not necessarily sustainable. For every one of them, we can argue a bull and a bear case. Most lead to profits or at least revenue. Some may be stable. Some lead to bubbles that may or may not collapse. We are only arguing that they are big, they are driving economic activity on a very large scale, and understanding them is critical to understanding China and where it’s headed.

via All you need to know about business in China | McKinsey & Company.

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11/04/2014

India’s election: Seasons of abundance | The Economist

LICK your lips: mangoes are coming into season in Andhra Pradesh, piled up on roadside fruit stalls. Hyderabadis claim theirs are the country’s sweetest. So too are the bribes paid by the state’s politicians to get people to vote. Since early March state police have seized more money from politicians aiming to buy votes—590m rupees ($10m)—than the rest of India combined. An excited local paper talks of “rampant cash movement”, reporting that police do not know where to store the bundles of notes, bags of gold and silver, cricket kits, saris and lorry-loads of booze.

Andhra Pradesh, India’s fifth most populous state, is due to hold an impressive series of polls in the next few weeks—municipal elections and then both state-assembly and national ones. Many politicians keep up old habits by paying voters, especially rural ones, to turn out. A villager can stand to pocket a handy 3,000 rupees per vote. Economists predict a mini-boom in consumer goods.

If this is the lamentable face of Indian politicking, the hopeful side is that, increasingly, skulduggery is being pursued. A worker with the Bharatiya Janata Party (BJP) in Hyderabad says police looking for illicit cash stopped and searched her car five times in a single drive one day last week.

This may be because in Andhra Pradesh, unusually, politicians are not currently running the show. The state is under “president’s rule”, with bureaucrats in charge, ahead of its breaking into two on June 2nd. Then, a new state, Telangana, will emerge to become India’s 29th, covering much of the territory once ruled by the Nizams of Hyderabad, the fabulously wealthy Muslim dynasty whose reign India’s army ended in 1948. A rump coastal state gets to keep the name Andhra Pradesh. For a decade Hyderabad will serve as joint capital.

The split will have a bearing on the national election. In 2009 the ruling coalition, the United Progressive Alliance, led by Congress, returned to national office on the back of two whopping southern victories. Congress scooped 33 seats in Andhra Pradesh, more than in any other state. Its ally next door in Tamil Nadu, the Dravida Munnetra Kazhagam (DMK), got 18 seats. Both now face heavy defeats. “The south’s biggest impact nationally will be negative, in not voting for Congress”, says K.C. Suri of Hyderabad University.

via India’s election: Seasons of abundance | The Economist.

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11/04/2014

India Under Narendra Modi Could Be Japan’s Best Friend – Businessweek

The results of national elections in India, expected to be announced on May 12, could mean good news for Japan and not such good news for China. Narendra Modi, the leader of the Hindu nationalist opposition party, has long been a favorite of Japanese Prime Minister Shinzo Abe, who would like to foster military and economic ties with India. Modi, the front-runner in the contest to be India’s prime minister, and Abe also share an antagonism for China. Modi has criticized the government of Prime Minister Manmohan Singh for being too accommodating toward China and has pledged to take a tougher line on issues such as the border dispute between the two countries that has festered for decades.

A supporter of Narendra Modi dons a mask of the Hindu nationalist candidate

Abe has clashed with China in a dispute over the ownership of several islands in the East China Sea. When it comes to the Chinese, “the Japanese are extremely apprehensive,” says P.K. Ghosh, senior fellow at the Observer Research Foundation, a New Delhi think tank. “It doesn’t take a genius to say India can be the largest friend of the Japanese.”

Abe has long treated Modi as a kindred spirit. Even after the George W. Bush administration put Modi on a travel blacklist for his alleged role in the 2002 riots that killed about 1,100 people, mostly Muslims, in Gujarat state, Abe welcomed Modi to Japan. The Indian politician, who was exonerated by the Indian courts, visited in 2007 during Abe’s first term as prime minister and then again when Abe was opposition leader in 2012. “Japan has worked very hard to improve relations with India,” says retired Indian General Vinod Saighal, author of Revitalising Indian Democracy. With a Modi victory, he says, relations “will get a boost, certainly.”

via India Under Narendra Modi Could Be Japan’s Best Friend – Businessweek.

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11/04/2014

In China, Xi’s Anticorruption Drive Nabs Elite, Low Ranks Alike – Businessweek

Chinese President Xi Jinping’s anticorruption campaign has lasted longer, gone deeper, and struck higher than many analysts and academics had expected. Xi has been so zealous that since late last year retired Communist Party leaders including ex-President Jiang Zemin have cautioned him to take a more measured pace and not be too harsh, say Ding Xueliang, a professor of social science at the Hong Kong University of Science & Technology, and Willy Lam, an expert on elite politics at the Chinese University of Hong Kong.

Chinese President Xi Jinping in Berlin on March 28

Xi is cracking down on the army and the police at the same time, something no leader has done before, says Ding. Gu Junshan, a lieutenant general in charge of logistics for the People’s Liberation Army (PLA), has been charged with bribery, embezzlement, and abuse of power, the official Xinhua News Agency reported on March 31. He will be tried in military court.

China’s former top cop and security czar Zhou Yongkang is under investigation for corruption, say Ding and Lam. When asked at a March 2 press conference whether Zhou was under suspicion, a government spokesman avoided a direct answer, saying, “Anyone who violates the party’s discipline and the state law will be seriously investigated and punished, no matter who he is or how high ranking he is.” He added what seems to be a veiled confirmation: “I can only say so much so far. You know what I’m saying.”

More than 180,000 party officials were punished for corruption and abuse of power last year, according to the Central Commission for Discipline Inspection, the party’s watchdog. While most were low-level officials—or “flies,” as Xi has put it—they also included senior party members—“tigers,” in Xi’s words. Thirty-one senior officials were investigated by the commission last year: Eight had their graft cases handed over to prosecutors. The remaining 23 are still being investigated.

via In China, Xi’s Anticorruption Drive Nabs Elite, Low Ranks Alike – Businessweek.

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11/04/2014

Young professionals in Bangalore favour Modi’s promise, shrug off riots | India Insight

As far as Vinod Hegde is concerned, Indian prime minister candidate Narendra Modi bears no responsibility for the 2002 Gujarat riots. More to the point, Hegde doesn’t care.

Hegde, a 26-year-old stockbroker in Bangalore, said that for people like him, the Gujarat chief minister is the only choice to lead India after countrywide parliamentary elections that began this week.

Allegations that Modi failed to stop or even allowed deadly riots in 2002 don’t sway his vote, Hegde said. And if the ruling Congress party’s candidate is Rahul Gandhi, the choice becomes even clearer.

“Even assuming Modi has been responsible for XYZ, we don’t see an alternative,” Hegde said. Referencing a Twitter post by music director Vishal Dadlani, he said, “If I had to choose between a moron and a murderer, I’d probably choose the murderer.”

Not everyone states their case for supporting Modi in such blunt terms, but interviews with young professionals in Bangalore, the information technology hub known as India’s Silicon Valley reveals a calculation in favour of Modi and the Bharatiya Janata Party (BJP) that omits the riots from the equation.

For many people in Bangalore’s highly educated workforce, Modi is a welcome alternative to what is seen as an ineffective and corruption-tainted Congress party. They are part of what some media organizations have called a “Modi wave” that opinion polls, however unreliable, say could bring the BJP to power and push out the Gandhi-Nehru family’s Congress party.

Many BJP supporters see Rahul Gandhi, the party’s leader and the Gandhi family’s heir apparent, as ill suited for the job of running a country that is trying to revive its slowing economic growth and to provide opportunities for prosperity to its burgeoning middle class. (A note for people unfamiliar with this round of Lok Sabha elections: Indians will vote for members of Parliament in their local constituencies, and the winning party’s leadership names its ministers when it forms a new government.)

via Young professionals in Bangalore favour Modi’s promise, shrug off riots | India Insight.

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11/04/2014

China’s soaring potential a springboard for budget airlines | Reuters

The chairman of Spring Airlines requires his employees to use both sides of a sheet of paper before throwing it away and even removed most of the bulbs lighting the corridor to his office – all part of his quest to save money.

A Spring Airlines crew member sells food onboard an Airbus A320 aircraft near Shanghai July 6, 2012. REUTERS/Aly Song

China’s first low-cost airline has been profitable since 2006, its first full year of operation, but the budget aviation market is about to get a lot more competitive as the government moves to promote low-cost travel to meet a surge in demand from an increasingly wealthier population.

Over the last 18 months, Spring has been joined by two new competitors. China’s big state-backed carriers are also looking at launching budget carriers, a strategy industry executives say would be an additional boon to plane makers Airbus Group (AIR.PA) and Boeing Co. (BA.N).

The Civil Aviation Administration of China (CAAC) plans to add nearly 80 new airports by 2020, including a $14.5 billion second airport in the capital Beijing, and is urging other airports to build new terminals and convert existing facilities to handle budget airlines.

The initiative, industry observers say, would usher in a new era for low-cost carriers (LCCs) in a country where one in four people travelled by air in 2013. That number is set to rise to almost the whole population in the next two decades, according to Airbus executives, with China to replace the United States as the world’s largest aviation market during the same period.

via China’s soaring potential a springboard for budget airlines | Reuters.

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11/04/2014

Beijing seeks to ban purchase of cigarettes with public funds | Reuters

Good news for Chinese health, bad news for the cigarette industry.

“China’s capital Beijing is proposing to ban the use of government money to buy cigarettes, either as gifts or to be provided at official functions, state media said on Friday, in the latest move to try and curtail smoking.

Extinguished cigarettes are seen in an ashtray at the Shanghai Railway Station December 23, 2013. REUTERS/Aly Song

China, home to some 300 million smokers, is the world’s largest consumer of tobacco, and smoking is a ubiquitous part of social life, particularly for men. Cartons of cigarettes are commonly given as presents or provided at formal events.

The Beijing government rules, currently in the proposal stage, would ban cigarettes being provided or given at any official event, the official Xinhua news agency reported.

The rules also seek a ban on promotional sales activities or advertising for cigarettes and a ban on smoking in public places like train stations, hospitals and schools, with fines of up to 200 yuan ($32), the report said.

Beijing, along with other parts of China, already bans smoking in many public places, though the rules are generally ignored.

Xinhua did not say when the new rules may go into effect.

Tougher regulation of smoking is a priority this year, officials from the National Health and Family Planning Commission said in January, adding that the agency was pushing lawmakers to toughen laws on tobacco use.

The ruling Communist Party said last year that officials must not light up in schools, workplaces, stadiums, and on public transport, among other places, so as to set a positive example.

($1 = 6.2125 Chinese yuan)”

via Beijing seeks to ban purchase of cigarettes with public funds | Reuters.

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10/04/2014

Chinese Communist Party banquets cut by half in 2013 under Xi’s austerity drive | South China Morning Post

A new study has revealed the impact of President Xi Jinping’s belt-tightening measures, with the number of official banquets falling by as much as 50 per cent last year.

scmp_07jul08_ns_dinner8_dw8_6863.jpg

Zhang Zhongliang, director of the statistical education centre of the National Bureau of Statistics, showed that Xi’s year-long campaign not only cut down expenditures but also freed up time by “setting officials free” from such obligations.

Zhang read out some findings of the study on the effects of Xi’s eight-point austerity directive at the Beijing-based Communication University of China, the Southern Metropolis Daily reported on Thursday.

He said county-level officials, who typically spend the most time at banquets among all ranks of government, on average attended 12.2 official banquets per week last year, compared to 18.2 per week in 2012.

Zhang said county engagements dropped by one-third, while provincial and national-level officials saw the number of banquets drop by half.

This gave civil servants an average of 30 minutes more with their loved ones, Zhang said.

It was not reported whether the survey was based on reports from bureaus or monitoring by third parties.

At least six different sectors were directly affected by the crackdown on official parties, mainly the catering, tobacco and wine industries, the study said.

Zhang said the catering industry’s growth dropped to 3.8 per cent last year from 8.8 per cent the previous year. The total sales of luxury wines in the mainland market plunged 40 per cent in the same period.

Zhang said these measures partly contributed to a slowdown in the country’s economy but it was “a price that must be paid” to root out corruption.

Extravagance among party cadres drove up consumption in the short-term, but would distort supply and demand in the long run, he said.

via Communist Party banquets cut by half in 2013 under Xi’s austerity drive | South China Morning Post.

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10/04/2014

Chinese Exports Plummeted Last Month. Puzzled? We Have You Covered – China Real Time Report – WSJ

China’s exports were down 6.6% on year in March, confounding economists, many of whom expected growth of over 4%.

What’s going on?

First, it’s important to remember that China’s trade statistics in the first quarter are often skewed by the Chinese Lunar New Year holidays, when activity slows down in much of East Asia.

But economists expected exports to show signs of a pickup in March, the first month not affected by the holidays, which this year fell in late January and early February.

One explanation is the March data was warped by over-invoicing. This is a practice by which Chinese companies dodge capital controls by using fake export invoices to get money into the country to benefit from relatively high onshore interest rates.

Beijing cracked down on the practice last spring, but over-invoicing was still prevalent in March 2013. Since then it has decreased because of tighter regulatory controls. The government’s efforts to guide the yuan currency lower this year also has diminished the attraction of such a carry trade.

That could mean the year-ago comparison was artificially boosted, making March 2014’s numbers look poor by comparison.

“Do not worry about the export data,” wrote Louis Kuijs, an economist at RBS in Hong Kong, in a note to clients.

RBS estimates year-on-year export growth in March 2013 was inflated by 11.8 percentage points due to over-invoicing. The bank also thinks export growth on-year in March this was 5.2% adjusting for over-invoicing.

“The competitiveness of China’s manufacturing sector is still solid, allowing its export sector to benefit from global demand growth,” Mr. Kuijs wrote.

Andrew Tilton, an economist at Goldman Sachs in Asia, agreed with this assessment.

“The main reason is that the over-invoicing distortions were peaking last year around this time,” he said. Now, “the increased currency volatility and deprecation is discouraging that activity from a financial incentive perspective.”

via Chinese Exports Plummeted Last Month. Puzzled? We Have You Covered – China Real Time Report – WSJ.

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