Posts tagged ‘economy’

28/06/2016

Pfizer to invest $350 million in China biotech hub, first in Asia | Reuters

Pfizer Inc (PFE.N) will invest $350 million to build a biotech center in China, the latest in a series of moves by pharma industry giants to set up shop in the world’s no. 2 drugs market with the aim of securing faster approvals for their products.

The facility in eastern Hangzhou region – Pfizer’s first biotech center in Asia – is expected to be completed by 2018, the firm said in a statement on Tuesday.

Global “Big Pharma” is increasingly looking for smart ways to tap China’s healthcare market, estimated by consultancy IMS Health to be worth around $185 billion by 2018. From investing in China facilities to acquisitions, licensing deals and joint ventures, the aim is to seek an edge in dealings with domestic regulators and government.

John Young, group president for Pfizer’s essential health division, said in the statement that the Hangzhou facility should “help support China’s aim to increase the complexity and value of its manufacturing sector by 2025”.

Pfizer said it would “work closely” with local regulators to bring the drugs “to market as soon as possible”. The center will mostly on biologic drugs – made from living micro-organisms rather than chemically synthesized – and lower-cost ‘biosimilars’, of generic versions of biologics.

Pharmaceutical executives have long complained about the slow process of getting drugs to market in China, while others have run up against regulatory roadblocks. Pfizer had to close its vaccine business in the country last year after a license for its top-selling vaccine Prevenar was not renewed.

China’s overall healthcare spending is set to hit $1.3 trillion by 2020, but drug market growth has slowed to a low single-digit percentage pace from over 20 percent just four years ago as branded generics have lost their shine and Beijing has looked to drive down prices to keep a lid on costs.

Source: Pfizer to invest $350 million in China biotech hub, first in Asia | Reuters

27/06/2016

This Is What Happens to Your Clothes When You Donate Them in the West – India Real Time – WSJ

As heaps of castoff clothes from the U.S. cascade down a conveyor belt, rows of sari-clad women frantically sort the garments by type—T-shirts in one barrel, women’s jeans in another. They pluck out sweatpants, underwear, sweaters, coats, and even furs.

The jumble is part of the thousands of tons of used clothing that arrive each month in this western Indian port, a hub in the vast global network that purchases secondhand clothes in rich countries and resells them throughout the developing world.

“I don’t understand why people throw away all these clothes,” says one of the sorters, as she sits on a warehouse floor during a break. “Maybe they don’t have time to wash them.

”In fact, the glut springs from the rise of fast fashion, which has flooded the world with inexpensive clothing, often produced in some of the same low-wage countries where it later ends up sold in market stalls or reprocessed into goods like blankets or pillow stuffing.

To some, this a virtuous circle, minimizing waste while providing jobs and a source of low-cost clothes for the poor. Even retailers such as Hennes & Mauritz AB and others have gotten into the act, collecting worn apparel to recycle. Since it began collecting used clothing at its stores in 2013, H&M has recycled more than 20,000 tons of it.

Source: This Is What Happens to Your Clothes When You Donate Them in the West – India Real Time – WSJ

24/06/2016

Two stumbles forward, one back | The Economist

LAST November, two days after India’s ruling party suffered a drubbing at local polls in the state of Bihar, the government unexpectedly opened a dozen new industries to foreign direct investment (FDI). A gushing official called it “the biggest path-breaking and the most radical changes in the FDI regime ever undertaken”.

On June 20th, two days after Raghuram Rajan, the respected governor of India’s central bank, abruptly announced that he would soon step down, the government covered its embarrassment with another impromptu salute to FDI. The slim package of enticements, amounting to a slight lowering of barriers in some of the same industries, has made India “the most open economy in the world for FDI,” said the office of Narendra Modi, the prime minister.

Hyperbole is not unexpected from a government keen to burnish its liberalising credentials. But it has not lived up to its cheery slogans (“Startup India”, “We Unobstacle”, “Minimum Government, Maximum Governance”). Two years after clinching a sweeping electoral mandate, and with the opposition in disarray, Mr Modi’s reform agenda should be in full swing. Instead, as with previous governments, his ill-focused initiatives have run up against India’s statist bureaucracy.

To be fair, much of what has been done is useful. Corruption has been stemmed, at least at ministerial level. A vital bankruptcy law has been approved. Yet for all the evidence that Mr Modi’s team is doing a better job running the existing economic machinery, it has shown limited appetite for overhauling it.

Pessimists see Mr Rajan’s departure as evidence of a further wilting of ambition. After all, as a former chief economist of the IMF, he is an enthusiastic advocate of structural reform. Then again, at the central bank he has focused chiefly on bringing down inflation. Optimists hope he is being eased out because of his habit of speaking his mind, thereby occasionally contradicting the government line, rather than to pave the way for retrograde policies.

Thanks to a mix of lower oil prices and prudent fiscal policies (and perhaps also flawed statistics) the economy grew by 7.9% in the first quarter, compared with the same period the year before, the fastest pace among big economies. Ministers think further acceleration is possible.

That may prove difficult. India’s public-sector banks, which hold 70% of the industry’s assets, are stuffed with bad loans; the central bank reckons that some 17.7% are “stressed”. That Mr Rajan forced them to disclose this fact will not have endeared him to politically connected tycoons now being badgered to repay the banks. Bank shares rose after he said he was leaving, presumably in the hope that his successor will go easy on them. Rating agencies fret that they will still need recapitalising, blowing a hole in the government’s finances. In the meantime, credit to industry has all but ground to a halt.

India’s overweening bureaucracy is another drag on growth. Copious red-tape and poor infrastructure put India 130th out of 189 countries in the World Bank’s “Ease of doing business” rankings. Getting permits to build a warehouse in Mumbai involves 40 steps and costs more than 25% of its value, compared with less than 2% in rich countries. It takes 1,420 days, on average, to enforce a contract.

A slew of liberalising reforms in 1991, when India was in far worse shape than now, were left unfinished as the economy gradually recovered. Whereas product markets were freed from the “licence Raj”, which no longer dictates how much of what each factory can produce, inputs such as land, labour and capital are still heavily regulated. Having once sought to prise those open, the Modi government now encourages state governments to take the lead with their own reforms.

One result is that there is no proper market for land: businesses that want to set up shop are best off wooing state governments to provide some. Chief ministers with a presidential approach (a model Mr Modi espoused in his previous job running Gujarat) scurry around scouting for plots on behalf of the private sector in a manner that would have seemed familiar to the central planners of yore.

That India is pro-business but not necessarily pro-market is a frequent refrain. “The government wants to create jobs, not the environment in which job-creation flourishes,” says one investor. Special economic zones are set up as sops, sometimes to entice single companies. Even big foreign investors are essentially told what to do: Walmart can only open cash-and-carry stores closed to the general public, Amazon must sell mostly other merchants’ goods rather than its own, and so on.If businesses cannot get things done themselves, even the most energetic politician will struggle to set up enough factories to general public, Amazon must sell mostly other merchants’ goods rather than its own, and so on.

Source: Two stumbles forward, one back | The Economist

24/06/2016

Are fears of mass unemployment in China overblown? | Reuters

Despite its sputtering economy – or perhaps because of it – China’s labor market may be able to provide more jobs for laid off workers than many think.

The working age population is shrinking by several million each year and the number of workers willing to migrate beyond their home province is falling, leaving jobs available for those willing to travel.

This suggests concerns about mass unemployment as China cuts down its industrial capacity and the risk that this could lead to social unrest may be overdone.

Take Li Xi, 34, for instance.After losing his job of 15 years at Highsee Iron and Steel in the slow-growing northern province of Shanxi, Li was not out of work for long.

Encouraged by friends to join them at an electronics factory 1,000 km (620 miles) to the south, he made the journey to Suzhou near Shanghai. The rest was easy.”On the first day I did a health check, and on the second day I was working,” Li said.

China’s economic growth slowed to a 25-year-low in 2015 of less than 7 percent and Beijing has flagged layoffs as it reduces massive surplus industrial capacity and gears the economy more to services and consumption.

Sources said in March that China was expecting to lay off 5-6 million state workers in the next two to three years as it curbs production capacity and pollution in rust-belt provinces.

While there is scant official data to build an accurate picture of Chinese unemployment, Chang Chun Hua, China economist at Nomura, said the jobs market can handle the unemployment pressures for now.

The working age population has been shrinking since 2012. Last year, the number of people between the ages of 16 and 59 shrank by 4.87 million, government statistics show. In 2014, the age group contracted by 3.71 million.

At the same time, the government says a higher-than-expected 5.77 million jobs were created between January and May this year.

“In general, the current unemployment pressure is still manageable for the Chinese government,” Hua said.

Source: Are fears of mass unemployment in China overblown? | Reuters

24/06/2016

Capturing China’s $5 trillion productivity opportunity | McKinsey & Company

It won’t be easy, but shifting to a productivity-led economy from one focused on investment could add trillions of dollars to the country’s growth by 2030.

After three decades of sizzling growth, China is now regarded by the World Bank as an upper-middle-income nation, and it’s on its way to being one of the world’s advanced economies. The investment-led growth model that underpinned this extraordinary progress has served China well. Yet some strains associated with that approach have become evident.

In 2015, the country’s GDP growth dipped to a 25-year low, corporate debt soared, foreign reserves fell by $500 billion, and the stock market dropped by nearly 50 percent. A long tail of poorly performing companies pulls down the average, although top-performing Chinese companies often have returns comparable with those of top US companies in their industries. More than 80 percent of economic profit comes from financial services—a distorted economy. Speculation that China could be on track for a financial crisis has been on the rise.

The nation faces an important choice: whether to continue with its old model and raise the risk of a hard landing for the economy, or to shift gears. A new McKinsey Global Institute report, China’s choice: Capturing the $5 trillion productivity opportunity, finds that a new approach centered on productivity could generate 36 trillion renminbi ($5.6 trillion) of additional GDP by 2030, compared with continuing the investment-led path. Household income could rise by 33 trillion renminbi ($5.1 trillion).

Pursuing a new economic model

China has the capacity to manage the decisive shift to a productivity-led model. Its government can pull fiscal and monetary levers, such as raising sovereign debt and securing additional financing on the basis of 123 trillion renminbi in state-owned assets. China has a vibrant private sector, earning three times the returns on assets of state-owned enterprises. There are now 116 million middle-class and affluent households (with annual disposable income of at least $21,000 per year), compared with just 2 million such households in 2000. And the country is ripe for a productivity revolution. Labor productivity is 15 to 30 percent of the average in countries that are part of the Organisation for Economic Co-operation and Development (OECD).

A new productivity-led model would enable China to create more sustainable jobs, reinforcing the rise of the consuming middle class and accelerating progress toward being a full-fledged advanced economy. Such a shift will require China to steer investment away from overbuilt industries to businesses that have the potential to raise productivity and create new jobs. Weak competitors would need to be allowed to fail rather than drag down profitability in major sectors. Consumers would have more access to services and opportunities to participate in the economy.

Making this transition is an urgent imperative. The longer China continues to accumulate debt to support near-term goals for GDP growth, the greater the risks of a hard landing. We estimate that the nonperforming-loan ratio in 2015 was already at about 7 percent, well above the reported 1.7 percent. If no visible progress is made to curb lending to poorly performing companies, and if the performance of Chinese companies overall continues to deteriorate, we estimate that the nonperforming-loan ratio could rise to 15 percent. This would trigger a substantial impairment of banks’ capital and require replenishing equity by as much as 8.2 trillion renminbi ($1.3 trillion) in 2019. In other words, every year of delay could raise the potential cost by more than 2 trillion renminbi ($310 billion). Although such an escalation would not lead to a systemic banking crisis, a liquidity crunch among corporate borrowers and waning confidence of investors and consumers during the recovery phase would have a significant negative impact on growth.

Our report identifies five major opportunities to raise productivity by 2030:

  • unleashing more than 39 trillion renminbi ($6 trillion) in consumption by serving middle-class consumers better
  • enabling new business processes through digitization
  • moving up the value chain through innovation, especially in R&D-intensive sectors, where profits are only about one-third of those of global leaders
  • improving business operations through lean techniques and higher energy efficiency, for instance, which could deliver a 15 to 30 percent productivity boost
  • strengthening competitiveness by deepening global connections, potentially raising productivity by 10 to 15 percent

Capturing these opportunities requires sweeping change to institutions. China needs to open up more sectors to competition, enable corporate restructuring, and further develop its capital markets. It needs to raise the skills of the labor force to fill its talent gap and to sustain labor mobility. The government will need to manage conflicts among many stakeholders, as well as shift governance and incentives that rewarded a single-minded focus on rising GDP, even as it modernizes its own processes.

Source: Capturing China’s $5 trillion productivity opportunity | McKinsey & Company

23/06/2016

Foreign Direct Investment Into India Jumps 26%, U.N. Says – India Real Time – WSJ

India’s fast-growing economy attracted $44 billion in foreign direct investment in 2015, making it the 10th largest destination globally for such investment last year, according to United Nations figures released this week.

That represents a 26% increase in foreign investment in India over the year before, according to the U.N. Conference on Trade and Development, which published the data in its latest World Investment Report. Prime Minister Narendra Modi has touted the growing stream of overseas money entering India as a signal accomplishment of his two years in office.

The latest U.N. figures suggest in particular that the Modi government’s efforts to encourage more global companies to “Make in India” are reaping some success. Foreign investments worth $28.7 billion in so-called “greenfield” manufacturing projects, or those that start from scratch, were announced in India last year—more than double the $11 billion in investments that were announced in 2014. Electronics manufacturing saw an especially big boost, with $13.5 billion invested in such projects in 2015, compared with $1.1 billion the year before.

The Modi administration has made changes to keep the money coming. Last year it began allowing foreigners to own larger stakes in Indian companies in insurance, construction, mining, manufacturing and others. This week the government announced increases in foreign-investment limits in defense, retail, civil aviation, pharmaceuticals and grocery businesses. The changes, the official press release declared, make India “the most open economy in the world” for foreign direct investment.

Some experts doubt the latest rule changes will cause more money to flood in right away, though, given the degree to which Indian regulations remain vague and regulatory decision-making remains opaque.

India has risen steadily as a host of overseas investment since 2000, when the entirety of foreigners’ stakes in the economy was valued at $16 billion. The same figure last year was $282 billion.

In terms of yearly inflows, the country still ranks far behind mainland China, which lured $136 billion in foreign direct investment in 2015; Hong Kong, which attracted $175 billion; and Singapore, $65 billion. The U.S. was 2015’s top host of investment from abroad: $380 billion of it flowed into the world’s largest economy last year.

Among executives surveyed by the UNCTAD, 19% picked India as the most promising host country for investment over the next few years. Nearly half picked the U.S.; 21% chose China. But world-wide, the U.N. body expects foreign investment flows to dip by 10% to 15% this year. Its surveys indicate that multinational companies are skittish about volatile exchange rates, geopolitical uncertainty and mounting debt in developing countries.

Source: Foreign Direct Investment Into India Jumps 26%, U.N. Says – India Real Time – WSJ

27/01/2016

The Drivers of Growth in China’s New Normal – China Real Time Report – WSJ

As China’s economic growth slows and the manufacturing and industrial sectors face declines, many companies are trying to determine whether or where they can tap into more growth.

The old drivers of the economy, including the middle class and the export sector, are out. What’s in for China’s so-called “new normal” is the upper-middle class and the service sector.

Affluent shoppers under the age of 35 and Internet surfers will push China’s consumer market up to $6.5 trillion in sales by 2020, an increase of 54% from 2015, according to consultancy the Boston Consulting Group. Upper-middle class households, defined as those making between $24,001 and $46,000 in annual income, will double to 100 million in population by 2020 and account for 30% of all urban households in the country.

Consumption is not isolated from the slowdown, but China hasn’t stopped shopping, consultancy The Boston Consulting Group said in a recent report. Consumption growth this year is poised to outpace GDP growth, which economists expect to range between 6% and 6.6%, BCG said.

Source: The Drivers of Growth in China’s New Normal – China Real Time Report – WSJ

02/11/2015

What Will the Two-Child Policy Mean for China’s Property Market? – China Real Time Report – WSJ

China’s latest move to scrap its one-child policy buoyed property developer stocks Friday on hopes it could provide a boost to housing demand.

All Chinese couples will be allowed to have two children, Chinese official media said Thursday, after a meeting of top officials. While a timetable hasn’t been established, there are prospects that an increase in the size of Chinese households could raise demand for larger homes.

Shanghai housewife Tracy Li said she and her husband will be looking for a larger home once their two sons, one aged four and one who is almost a year, get older. They currently live in a two-bedroom apartment in Shanghai’s Minhang district. Like many Chinese parents, she doesn’t think it’s necessary for each child to have their own room but want to be able to accommodate grandparents, who in China are frequently deeply involved in childcare.

“When the children are older, it’s not too good for them to share a bedroom with their grandparents when they come over,” said the 34-year-old Ms. Li, who asked to be referred to by her English, rather than her Chinese, name. Finding a home in a good school district will take some time, said Ms. Li, who wants to move before her oldest son reaches school age.

Source: What Will the Two-Child Policy Mean for China’s Property Market? – China Real Time Report – WSJ

29/09/2015

Cisco joins flurry of U.S.-China tech partnerships | Reuters

Cisco Systems Inc (CSCO.O) said Thursday it would form a joint-venture with Chinese server maker Inspur to sell networking and cloud computing products in China, where the Silicon Valley firm faces political pressure and declining sales.

Chuck Robbins, incoming CEO of Cisco, listens a question from media during a news conference in New Delhi, India, June 18, 2015. REUTERS/Adnan Abidi

Cisco and Inspur said they would invest $100 million in the project, although they offered few other details.

The partnership is one of a growing number of tie-ups between Chinese and U.S. technology firms announced during or ahead of Chinese President Xi Jinping’s visit to the United States this week.

Microsoft Corp (MSFT.O) said on Thursday it would partner with Baidu Inc (BIDU.O) and Chinese state-owned private investment firm Tsinghua Unigroup on cloud technology, while Dell Inc announced last week it would invest $125 billion over five years in China.

Earlier this year, IBM (IBM.N) pledged to help develop China’s advanced chip industry with a “Made with China” strategy, while chipmakers Intel Corp (INTC.O) and Qualcomm Inc (QCOM.O) are developing chips with smaller Chinese companies.

Similar to its dealings with the foreign auto industry in decades past, Chinese officials have made clear to foreign technology firms that market access depends on their sharing technology and cooperating with Chinese industry.

Like many of its peers, Cisco’s market share has retreated in recent quarters in China, where its products have been labeled a cybersecurity threat by state media and government-affiliated experts.

U.S. business lobbies have said the Chinese allegations amount to protectionism, while China has pointed to the experience of Cisco’s Shenzhen-based rival Huawei Technologies Co Ltd [HWT.UL], which faced similar accusations from Capitol Hill when it sought to enter the United States.

Source: Cisco joins flurry of U.S.-China tech partnerships | Reuters

29/09/2015

Boeing to sell 300 jets to China firms, set up China plant: Xinhua | Reuters

Boeing Co has signed deals to sell 300 aircraft to three Chinese firms and set up an aircraft plant in China, becoming the first U.S. firm to clinch a business tie-up in the country since Chinese president Xi Jinping began a U.S. state visit, the official Xinhua news agency said.

Photo

The aircraft deals, potentially worth tens of billions of dollars in total, are collectively the largest order the aerospace firm has received from Chinese companies.

China’s ICBC Financial Leasing Co, a unit of the Industrial and Commercial Bank of China, on Wednesday separately confirmed it will buy 30 of Boeing’s 737-800 jets, worth $2.88 billion at list prices.

China Aviation Supplies Holding Company and China Development Bank Leasing are the other two customers for the aircraft, said Xinhua.

Boeing, which is locked in a fierce battle for plane orders with European rival Airbus, will build its first aircraft completion plant outside the United States in China in order to gain a foothold in that important market, say industry observers. Boeing raised its forecast for China’s aircraft demand by 5 percent in August, saying that the country will need 6,330 planes over the next 20 years.

It signed a cooperation document with Commercial Aircraft Corporation of China (Comac) to build the aircraft completion center for its 737 passenger jet in China, added Xinhua. The agency didn’t disclose further details.

An aircraft’s interiors and some systems are usually installed, and the plane is painted in the customer’s livery, at completion centers. The final flight trials are then completed before the aircraft is delivered to the customer.

Boeing executives and officials from the Chinese firms could not immediately be reached for comment. Xi, who arrived in Seattle on Tuesday, is set to visit Boeing on Wednesday.

The number of air passengers traveling to, from and within China is set to nearly triple by 2034 to some 1.3 billion, surpassing an expected 1.2 billion for the United States, according to official estimates.

State-owned airlines like Air China, China Eastern Airlines and China Southern Airlines, and privately-owned budget carrier Spring Airlines, are growing fast and adding new planes to meet this demand for both short and long haul air travel.

Boeing’s plans for an aircraft completion center comes after Airbus signed an agreement in July to set up its second Chinese plant.

Source: Boeing to sell 300 jets to China firms, set up China plant: Xinhua | Reuters

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