Posts tagged ‘economy’

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06/11/2012

* India Is Clamping Down on Spending

WSJ: “India’s government has started to tighten its belt as it strives to meet the revised budget deficit target of 5.3% of gross domestic product for the year through March 2013.

It’s not that spending is decreasing: it’s still increasing –  only a lot less. So in September, government spending rose by a “paltry” 1.4% from a year earlier, according to a new report by brokerage Nomura.  By comparison, in August, spending had increased by a whopping 32% from a year earlier, Nomura economist Sonal Varma told India Real Time.

To look at it another way, public spending rose by 0.47% between August and September compared to a 30.7% increase in the same period last year.

Nomura’s Ms. Varma told India Real Time said that the government has cut spending on sectors such as defense. A recent increase in fuel prices means the government is also saving money on subsidies. In September, the government raised the price of diesel by 14% to about 47 rupees to reduce its expenses on fuel subsidy. The government estimates this will save it around 150 billion rupees in the year ending March 31, 2013.

One of the reasons why public spending has slowed down, says Ms. Verma, is because the government has delayed paying subsidies to oil marketing companies. These are costs that may be partly rolled over to next year.

A senior finance ministry official told India Real Time that the government expects to cut at least 500 billion rupees, or about 4% of the 14.9 trillion rupees that it had planned to spend this year. The official said spending cut will be across the board, but did not want to single out any particular area.

Despite spending cuts, public expenditure remains high, mainly due to subsidies on fuel, food and fertilizers, and on social sector schemes.

To meet its budget deficit target, India needs to slash government expenditure as well as raise funds through stake sales in state-run companies and the sale of radio bandwidth.

These are the governments priorities as laid out by Finance Minister P. Chidambaram last week, when he announced a fiscal roadmap aimed at lowering the budget gap from 5.3% in the year through March 2013 to 3% by 2017.”

via India Is Clamping Down on Spending – India Real Time – WSJ.

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06/11/2012

* Chinese State Media Survey: It’s the Wealth Gap, Stupid

Close on the heels of a survey regarding happiness, comes this more serious survey. The new leadership should heed the results:

  1. Reducing the wealth gap
  2. Reducing corruption
  3. Reforming economics

WSJ: “With China’s once-a-decade leadership transition set to get underway on Thursday, pundits and scholars around the globe are speculating about what Beijing’s new top brass will — or won’t — do to tackle the country’s many problems. But what change are Chinese people themselves expecting to see?

If an online survey conducted by the state-run China Youth Daily newspaper is anything to go by, the answer is one that recalls the ideological roots, if not the recent reality, of China’s ruling party: income redistribution.

Of 11,405 Chinese Internet users polled by the Social Survey Center of China Youth Daily last week, 66.6% said they thought the country was likely to pursue reforms related to income distribution in the future, the newspaper reported on Tuesday (in Chinese). Second on the list were reforms aimed at curbing corruption (57.8%), followed by reforms of the economic system (53.5%) in third.

The results exceeded 100% because respondents were allowed to choose multiple options. Nearly half of respondents were born in the 1980s, with 17.7% born in the 1990s and the rest born in the 1970s, the newspaper said, adding that most of those who took part in the poll earned less than 5000 yuan ($800) per month.”

via State Media Survey: It’s the Wealth Gap, Stupid. – China Real Time Report – WSJ.

See also: https://chindia-alert.org/2012/11/05/china-authorities-pushing-happiness-amid-rising-discontent/

Posted in China alert, corruption, Economics, income-wealth gap, Inequalities | 2 Comments »

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15/10/2012

* The consuming challenge of food safety

Once again we see China’s central government trying to do the right thing, but thwarted by both selfish interests of unethical and unscrupulous business people, often with local authorities turning a blind eye to malpractices as any remedial action may reduce local economic gains.

China Daily: “Report shows eating healthily is a major concern for Chinese people

Food safety is a top concern for Chinese shoppers, especially regarding such produce as vegetables, meat, seafood, grain, cooking oils and dairy goods, according to a report from Ipsos.

The consuming challenge of food safety

It shows Chinese people are very concerned about the quality of what they eat, especially those who are older (aged 31 to 50) and those who earn a higher monthly salary (12,000 yuan a year and above – more than $1,900).

Most people are highly aware of various channels through which they can obtain information on food safety, especially with incidents regarding clenbuterol in meat (showing awareness rates as high as 94 percent), melamine in baby milk formulas (92 percent), swill-cooked “gutter” oil (85 percent) and tainted steamed buns (80 percent).

Food experts

Public concern about food safety results in food experts and third-party institutes being listened to in greater numbers and in more detail.

As a result, the Ipsos report shows that shoppers’ trust in experts and authorities has reached 83 percent. A total of 89 percent of the respondents have shown an interest in participating in science activities organized by such experts.

However, people do not always form an accurate picture. When there is negative news about one brand, trust in all brands in that or similar sectors tends to be affected. As many as 70 percent of the respondents said they would doubt not only the brand in question but also similar brands when news of a safety issue emerges.

“Food safety incidents that have occurred in China attracted a lot of attention but the general public still has a very limited knowledge base on the issue. In the United States and European countries, there have been fully fledged food manufacturing practice and response measures toward safety issues,” said Jennifer Tsai, managing director of Innovation and Forecasting at Ipsos Marketing in Greater China.

“Therefore, the consumers in those countries are less likely to become over-panicked and form serious doubts about all brands.”

Tsai added that an independent third-party body should be set up to provide information about manufacturers’ processes in raw material selection, production and distribution. The government should also have a role to play in this. However, this might require several years and the public still needs to learn more about food safety.”

via The consuming challenge of food safety |Economy |chinadaily.com.cn.

Posted in China alert, Economics, Food safety, Social & cultural | 3 Comments »

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05/10/2012

* India Moves Again to Ease Way for Foreign Investment

It’s a case of “in for a penny in for a pound”. If the Opposition is stirred up already against the opening up of retail business to FDI, why not jump in with insurance and pensions too.

New York Times: “In their second major effort in two months to revive a flagging economy, Indian policy makers on Thursday proposed letting foreign investors take a bigger stake in insurance and pension companies.

The measures, which were approved by the cabinet, will now go to the Parliament, where their passage is far from certain. The national governing coalition led by the Indian National Congress Party does not have a majority in the legislature, and opposition parties and even some of its own allies have said they do not support greater foreign investment.

Still, anticipation of the changes sent the India’s benchmark stock index Sensex up 1 percent to its highest close in more than a year.

The index has rallied about 5 percent since the middle of September, when the government allowed greater foreign investment in retailing and aviation and reduced government energy subsidies.

Under the proposal approved by the cabinet, foreign companies would be allowed to acquire up to 49 percent in Indian insurance and pension firms, a change that both Indian and overseas firms have long lobbied for, saying that the sectors needed more capital to grow.

Foreign companies are now allowed to hold a 26 percent stake in insurance companies but are not allowed to invest in pension firms. India’s insurance premiums total about $40 billion a year and its pension industry has assets of $300 million.

The changes will most likely face stiff opposition in Parliament, which was paralyzed during its last session after the opposition Bharatiya Janata Party repeatedly interrupted proceedings to demand the resignation of the prime minister, Manmohan Singh, in connection with a scandal involving the allocation of coal concessions. The next session of Parliament begins in November.

Opposition officials, who were involved in drafting the proposals at an earlier stage of the lawmaking process, have said that they would not support an increase in foreign investment to 49 percent. Some of the government’s allies have also said they do not support the change.

“Legislation in democracy is a process of negotiation and discussion,” Palaniappan Chidambaram, India’s finance minister, said at a news conference.

“Obviously, we need to talk. We will sit and talk to all parties, especially the principal opposition.””

via India Moves Again to Ease Way for Foreign Investment – NYTimes.com.

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29/09/2012

* China at critical time as CPC congress approaches

The article below is amazingly frank and open to be published by any official Chinese organ. It mentions the Cultural Revolution in negative terms, and it refers to “uninhibited and widespread abuse of power and corruption among government officials”. The article has obviously been vetted by senior officials before its release. If this level of frankness and openness continues, then true reform cannot be far behind. But, of course, as the article states at the end ” … the country’s new leaders, as what they say and do may signal the beginning of great changes in China …”

Xinhua: “There may be no better time than today to observe how China will change in the future, as the Communist Party of China (CPC) is gearing up for a key meeting that will see a once-in-a-decade leadership transition in the world’s most populous nation.

In a year of global elections, the world is closely scrutinizing the CPC 18th National Congress, to be convened on Nov. 8, and waiting to see how it will stand up to challenges facing the country and the CPC, as well as how it will influence the world at large.

After more than three decades of rapid growth thanks to the reform and opening-up drive, China has ushered in an important era of transition in which the country must transform its economy and make it more sustainable.

No matter how one views the event, the CPC’s 18th National Congress comes at a critical time for China, as the leadership it selects and the decisions it makes will have a profound impact on the world’s second-largest economy, and more importantly, on its people.

The Chinese have experienced many such critical moments in the past century, during which time incredible changes occurred in the country and the CPC itself.

One apparent distinction is that the CPC has grown incredibly large, with the number of members exploding from about 50 when the Party was founded in 1921 to more than 82 million on the eve of the CPC 18th National Congress, a number equivalent to the entire population of Germany.

Since it became the ruling party in 1949, the CPC has suffered twists and turns, such as the self-inflicted Cultural Revolution from 1966 to 1976, but managed to restore China’s economic strength in the global arena through reform and the introduction of a market economy.

Over the past decade, China has become the world’s fastest growing economy, with an average annual growth of 10.7 percent from 2003 to 2011, according to data from the National Bureau of Statistics. China took up about 10 percent of the world’s gross domestic product while contributing more than one-fifth of global growth last year.

Yet unprecedented challenges are still ahead for the CPC, even though its top leadership has defined the current transition period as a time that is full of strategic opportunities to build China into a prosperous society by 2020.

The CPC 18th National Congress comes at a time when the economy is facing mounting downward pressure after three decades of almost two-digit growth.

The era of ultra-high economic growth will soon be fading in China, where policymakers will have to get used to an economy that expands by about 8 percent annually, according to a study conducted by a research team from the Chinese Academy of Social Sciences, a government think tank.

But the most pressing issue for the Chinese public is the uninhibited and widespread abuse of power and corruption among government officials and businessmen. A series of systematic and structural problems that have impeded the healthy development of the Chinese economy and society have yet to be resolved.

Addressing problems that concern the people’s vital interests and giving more respect to the will of the people in making policies will continue to be a challenge for the CPC.

Challenges have also appeared from outside, as the external environment has never been as complicated as it is now.

Due to the deepening of the sovereign debt crisis and massive economic restructuring that occurred after the global financial crisis, developed economies may sink into long-term recession, thus creating new uncertainties and posing increasing risks for emerging economies like China.

While maintaining the continuity of its policies, China must also adjust its relations with major powers, developing countries and neighboring countries according to the latest changes in the global situation. Any change in China will inevitably affect the rest of the world in an era of economic globalization.

All of these problems and challenges will have to be addressed when the CPC’s 18th National Congress is convened.

Hopefully, the CPC will draw lessons from its past successes and failures and establish a future direction for the country through resolutions on ideology-building, political routes and personnel management.

When the congress opens, people inside and outside China should closely watch the country’s new leaders, as what they say and do may signal the beginning of great changes in China and the rest of the world.”

via China at critical time as CPC congress approaches – Xinhua | English.news.cn.

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29/09/2012

* All that glitters is sold

China Daily: “With the rapid development of China’s economy, Chinese consumers’ appetite for jewellery has continued to grow, resulting in consistent sales growth in the domestic market.

All that glitters is sold

In 2011, spending in China’s retail jewellery market reached 40 billion yuan ($6.3 billion), making it the world’s largest consumer market for platinum and jade, and the second-largest diamond jewellery consumer after the US. But in addition to being one of the world’s largest jewellery consumers, China has gradually emerged as a competitive jewellery maker in the international market.

In fewer than 20 years, China’s jewellery industry has grown rapidly, and Shenzhen, a booming city in South China’s Guangdong province, has played a crucial role in leading this industry.

Thanks to the influence of Hong Kong’s industry, the past two decades have seen Shenzhen evolve into China’s jewellery capital. Since the 1990s, the city has been acknowledged as China’s biggest jewellery manufacturing base and trade distribution center.

According to the Gems and Jewellery Trade Association of Shenzhen, more than 2,000 jewellery companies now call the city home, and their annual output value of more than 50 billion yuan accounts for more than 70 percent of China’s overall jewellery production. In fact, the sales revenue of Shenzhen’s jewellery enterprises is not just ranked first in terms of domestic market share, it makes up about one-third of China’s total.

But jewellers in Shenzhen are no longer content to remain the largest outsourcing base for brands from Hong Kong or other parts of the world. They are trying to reshape old business models by investing heavily in branding their own independently designed products, aspiring to upgrade Shenzhen from an international hub of original equipment manufacturers to the birthplace of famous jewellery brands.

…

Some jewellers in Shenzhen have taken the lead in brand-building campaign. One of the most successful is Chow Tai Seng Jewelry Co Ltd, a large jewellery producer based in the city.

Established in 1966, Chow Tai Seng Jewelry is now one of the largest diamond-jewellery retailers and wholesalers in China. It currently has the largest jewellery chain in the country, with more than 2,000 shops in more than 300 Chinese cities.

The company posted sales revenue of 13 billion yuan (US$2 billion) in 2011, accounting for 7.1 percent of the market. Zhou Zongwen, board chairman of Chow Tai Seng Jewelry, said sales this year are expected to increase by about 30 percent over the previous year, and the company will maintain this robust growth momentum in the next few years.”

via All that glitters is sold |Economy |chinadaily.com.cn.

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Posted in Affluence, China alert, Chinese labels, Consumer, Economics, exports, fashion, luxury brand | 1 Comment »

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19/09/2012

* CIC Invested About $2 Billion in Alibaba

WSJ: “China’s sovereign wealth fund invested about $2 billion in Alibaba Group Holding Ltd. as the Chinese Internet company bought back a large stake owned by Yahoo Inc., according to people with knowledge of the deal.

image

Alibaba said late Tuesday that it had completed an initial buyback of half of Yahoo’s 40% stake in Alibaba in a deal valued at approximately $7.6 billion. China Investment Corp. led a consortium of Chinese investors including buyout funds Boyu Capital, Citic Capital, and China Development Bank Corp.’s private-equity arm.

Alibaba’s deal with Yahoo valued the Chinese e-commerce company, which includes Alibaba.com, payment service Alipay and other properties, at about $40 billion.

Under terms of the deal, Yahoo is receiving about $6.3 billion in cash, $800 million in preferred stock in Alibaba and $550 million as a result of amending the firms’ technology and intellectual-property licensing agreement.

Yahoo retains about a 23% stake in Alibaba, following the transaction announced Tuesday. Alibaba said it has the right to repurchase half of Yahoo’s remaining stake.

CIC, which has about $410 billion in assets under management, said in June interview that it had confidence in China’s economic growth and was actively scouting overseas investment opportunities leveraged to China’s growth prospects.”

via CIC Invested About $2 Billion in Alibaba – WSJ.com.

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17/09/2012

* For Beijing, expansion is not a big deal, it’s lots of them

The Times: “China’s slowing economy has failed to dent its global ambitions, with an increasingly hungry dragon scouring the globe for higher-value corporate deals, according to new research.

It made 177 outbound acquisitions worth a combined $63.1 billion last year, five times more than in 2005, the study by Mergermarket and Squire Sanders, the law firm, found. Deals are also growing in value, with the planned $15.1 billion takeover of Nexen, the Canadian oil sands explorer, by the state-owned CNOOC set to be China’s biggest-ever foreign acquisition, if it goes ahead.

Next month China will release its third-quarter GDP data, with some economists suggesting that growth could fall below the 7.6 per cent it brushed in the second quarter, despite assurances from Beijing that the economy would stabilise in the second half.

Natural resources and energy, the sectors most critical to China’s future growth, continue to dominate purchases, accounting for almost one in three M&A targets between 2011 and the year to date. Almost all these buyers are state-owned companies making investments at the behest of the Government.

Mao Tong, a Hong Kong-based partner at Squire Sanders, said: “We are seeing companies becoming more interested in making a strategic play, rather than just adding to their portfolio. These are big deals designed to position them in a global context.

“Even if the Chinese economy slows sharply, I think this will continue for a while. China is still the world’s most important manufacturing base, using huge amounts of iron ore, for example.”

China is eager to deploy its $3 trillion of foreign exchange reserves, mainly held in dollars, to counter the gradual depreciation of the currency and put its national wealth to good use. Yet the number of private sector deals is also expected to increase as the Government encourages state-owned banks to step up lending to the corporate sector.Britain is the favoured destination for Chinese dealmaking in Western Europe, accounting for a third of deals and two thirds of all outbound investment to the region, thanks to its reputation for transparency and a large number of Russian and Central Asian resources companies, Mr Mao suggested.

China has shown an increasing taste for European luxury brands, such as Shandong Heavy Industry’s buyout of the Italian yacht group Ferretti this year. Recent British brands going East include Weetabix, bought by the Shanghai dairy group Bright Food, and the $7.8 billion buyout of Northumbrian Water by Cheung Kong Infrastructure, a Hong Kong group chaired by Li Ka-shing.

The Dragon Index, a quarterly measure of China’s overseas direct investment by the private equity firm A Capital, which was released last week, hit an historic high in the second quarter, with ODI said to grow by 67 per cent between April and June on the previous quarter, to $24 billion.

André Loesekrug-Pietri, founder of A Capital, said: “State-owned enterprises remain the dominant force behind China’s ODI, with 90 per cent of the total deal value in the second quarter 2012.”

European companies accounted for 95 per cent of all non-resources deals in the quarter, the figures suggested. China’s share of US deals has slowed this year, owing to the sensitive political climate before the presidential election.”

via For Beijing, expansion is not a big deal, it’s lots of them | The Times.

See also: https://chindia-alert.org/2012/02/13/pattern-of-chinese-overseas-investments/

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15/09/2012

* Home Depot closes stores as it shifts focus

Home Depot closes stores as it shifts focusChina Daily: “Home Depot Inc, the largest home-improvement retailer in the United States, said it is closing its remaining seven big box stores in China as it shifts its focus to specialty and online outlets in the world’s second-largest economy.

The move will affect about 850 employees, and the company will record an after-tax charge of about $160 million, or 10 cents per diluted share, in the third quarter, it said in a statement issued on Thursday.

Employees of Home Depot gather outside the company’s Xi’an store on Friday as the home-improvement retailer declared that it will close all its seven stores in China. [Photo/China Daily]

“Closing stores is always a difficult decision,” said Frank Blake, the company’s chairman and CEO. “We’ve learned a great deal over the last six years in China, and our new approach leverages that experience.”

The company said it will keep its two recently launched specialty outlets – a paint and flooring store and a home decoration shop – in Tianjin.

It is also in talks with several Chinese e-commerce websites to explore selling its products online, it said, a combination believed to be more adequate to Chinese customers’ needs and shopping preferences.

The Atlanta-based seller of building materials and home-improvement products will also keep its R&D team in China, as well as the 170 workers in its sourcing offices in Shanghai and Shenzhen, the statement said.

Home Depot has 2,249 retail stores in operation globally. Excluding the charges related to the store closures, Home Depot expects its fiscal 2012 diluted earnings per share to rise 19 percent to $2.95 for the year.

The company’s success story in the global market did not translate well in China, where the do-it-yourself home decoration-retailing concept has failed to inspire Chinese homeowners, industry analysts said.

The US company acquired a local peer, The Home Way, in 2006 and took over its 12 outlets in China. However, it has closed five outlets since 2009. The company has also replaced three top executives since its establishment in the country, a move that did not alter its sales decline.

Though specialized home-improvement retail is an upcoming trend, Home Depot arrived in China too early, at a time when the country’s decoration culture and consumption behaviors were not ready for the concept, said Chen Lei, a retail analyst at China Galaxy Securities. Despite the construction boom, the low labor costs made the DIY decoration concept irrelevant, he said.

Chinese homeowners rarely paint houses or lay out wooden floors themselves. Rather, they prefer to hire decoration companies, which often find products with more competitive prices from local building material stores, Chen said.

In addition, the company’s strengths in the United States, including its lower prices due to its global sourcing channels, have been diluted in China.

“You can always find local brands that are cheaper, and consumers in various regions have very different preferences,” Chen said. “Winning the market through a price war is not going to work for a foreign retailer in China.””

via Home Depot closes stores as it shifts focus |Companies |chinadaily.com.cn.

Posted in Affluence, China alert, Construction, Economics, Housing, Retail | Leave a Comment »

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03/09/2012

* China’s steel traders expose banks’ bad debts

Reuters: “China’s banks are coming after the country’s steel traders, hauling executives into court to chase down loans that some traders said they didn’t initially need and can’t now repay.

An employee checks on a steel product at a steel production factory in Wuhan, Hubei province in this August 2, 2012 file photo. China's banks are coming after the country's steel traders, hauling executives into court to chase down loans that some traders said they didn't initially need and can't now repay. The heavy push to recover the loans is another sign of strain on China's financial system at a time when the country's leaders are contemplating another round of stimulus to boost the economy, and when banks are worried about bad debts piling up. REUTERS-Stringer-Files

The heavy push to recover the loans is another sign of strain on China’s financial system at a time when the country’s leaders are contemplating another round of stimulus to boost the economy, and when banks are worried about bad debts piling up.

The battle between the banks and steel traders also exposes flaws in the 4 trillion ($629 billion) stimulus round in 2008, and offers a warning to those calling for pumping more money into the system. At that time, Chinese banks threw money at the steel trade – a crucial cog in supplying the country’s massive construction and infrastructure growth.

But those steel loans, after offering a quick fix, became excessive, poorly managed, or a combination of the two. Government officials insisted more money was needed to prop up the industry. Steel executives said the money flow was too heavy, and they had to put the money to work in real estate and the stock market.

“After the financial crisis, when the government released its stimulus, banks begged us to borrow money we didn’t need,” Li Huanhan, the owner of Shanghai Shunze Steel Trading, told a judge at a recent hearing. “We had nothing to do with the money, so we turned to other investments, like real estate.””

via Insight: China’s steel traders expose banks’ bad debts | Reuters.

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