Posts tagged ‘economy’

« Older Entries  |   Newer Entries »
25/03/2013

* Behind China’s Switch to High-End Exports

WSJ: “As rising labor costs push manufacturing of T-shirts, jeans and the like out of China, the country has been able to offset that loss by grabbing the high end.

[image]

And nowhere is that on better display than the San Francisco-Oakland Bay Bridge.

When the switch is flipped each night for the span’s two-year artistic light show, the electricity flows through sophisticated power devices made by Gary Hua’s factory not far from Shanghai.

In the six years since it was founded, his company has grown to 1,000 employees, who last year made three million power-supply units for high-efficiency light-emitting diodes. The company, Inventronics Inc., expects to double production this year and export more than half that output.

With labor costs increasing in China, the country is now shifting its manufacturing focus to high-tech exports such as computers and sophisticated power devices. Shaun Rein of China Markets Research tells the WSJ’s Jake Lee how Western countries are reacting.

More Related Video

“The Bay Lights” Transforms San Francisco Skyline

Inventronics exemplifies China’s shift toward producing the higher-end products that are fueling the country’s export growth. China has been increasing exports in industries as varied as computers, car parts, high-technology lamps and optical-surgical equipment, according to a Wall Street Journal analysis of Chinese, European Union and U.S. trade data.

HSBC economists estimate that China’s share of global exports increased to 11% last year, from 9% before the 2008 financial crisis and around 5% at the turn of the millennium. China’s exports rose 8% last year while global trade expanded just 1.6%, according to the Netherlands Bureau for Economic Policy Analysis.

Chinese employment in higher-value industries such as electrical- and communications-equipment production has jumped since 2008 and now exceeds employment in textiles, garments and leather making, says Royal Bank of Scotland RBS.LN +0.68% economist Louis Kuijs.

High-tech goods are more valuable and are a bigger market than clothes. Over the past two years, Chinese exports to the U.S. of high-tech electronics, auto parts and optical devices rose 24%, to $129 billion, while exports of clothes and footwear rose just 5% to $47 billion. That has caused China’s share of the U.S. trade deficit to expand $20 billion last year to a record $315 billion, according to a U.S. government analysis.

A chunk of what is marked “Made in China” is made up of parts and design that originated elsewhere, making trade data a little fuzzy. The chips in Inventronics’ LED drivers are from the U.S., for example.

But China’s exports contain a rising percentage of materials that were made in the country, according to the World Trade Organization and the Organization for Economic Cooperation and Development. In 2009, the latest year for which figures are available, 28% of the value of Chinese exports came from foreign producers. In 2005, the figure was 36%.”

via Behind China’s Switch to High-End Exports – WSJ.com.

Posted in China alert, Construction, Economics, exports, GeoPolitics, Infrastructure | 1 Comment »

Tags:
25/03/2013

* Wages Rising in Chinese Factories? Only For Some

Working in these Times: “If we are to take recent news reports at face value, the collective conscience of the worlds consumers can be eased, because conditions at Chinese factories are improving.

Last year, The New York Times told us that these workers are “cheap no more,” and just this February, the Heritage Foundation, touting the virtues of global free trade, claimed that Chinese factory wages have risen 20 percent per year since 2005. Foxconn, Apples major supplier and the manufacturer of approximately 40 percent of the worlds consumer electronics, says it will hold free union elections every five years.

But Pollyannas should take pause: The average migrant workers $320 monthly salary in 2011 was actually 43 percent less than the $560 national average, according to government statistics. And though its true that Foxconn will permit the election of union leaders, we have yet to see how much Chinas so-called democratic unions can empower the workers they purport to represent.

Skepticism and caveats aside, the reality is that the lot of formal production workers in China is indeed advancing, however slowly and painfully. But that is true only for formal workers. What many consumers and observers fail to note are the perilous conditions of Chinas temporary production workers and the increased tendency among Chinese factories to use such workers to manufacture the brand-name products that fill your home.

Factories supplying Apple and Samsung, for example, make heavy use of temp workers. According to official statistics, temp workers make up 20 percent of Chinas urban workforce of 300 million, though the proportion in individual factories often tops 50 percent. As China turns into a land of short-term workers, there are grave implications for labor, companies, and Chinese society.”

via Wages Rising in Chinese Factories? Only For Some – Working In These Times.

Related articles

Posted in China alert, Digital communications, Economics, employment, IT, Technology, temporary workers | 1 Comment »

Tags: , , , , , , , ,
19/03/2013

* China heads back to the ’90s in economic reform drive

Reuters: “China is poised to launch its most serious economic reform drive since the 1990s after a series of top appointments at the weekend put the architects of Zhu Rongji‘s clash with state owned enterprises in charge of key economic agencies.

China's Vice Premier Ma Kai attends the sixth plenary meeting of the National People's Congress (NPC) at the Great Hall of the People, in Beijing in this March 16, 2013 file photo. China is poised to launch its most serious economic reform drive since the 1990s after a series of top appointments at the weekend put the architects of Zhu Rongji's clash with state owned enterprises in charge of key economic agencies. Picture taken March 16, 2013. REUTERS-Jason Lee-Files

Vice Premier Ma Kai, Finance Minister Lou Jiwei and central bank governor Zhou Xiaochuan were all Zhu lieutenants at the State Commission for Restructuring the Economy, which drew up the blueprint to sever the army’s ties with business and make millions jobless as state-owned enterprises (SOEs) were reformed.

They headline a clutch of officials in Premier Li Keqiang’s new line-up, who are broadly considered pro-business economic reformers able to finish the work started by arch-reformer Zhu when he was premier in a way that meets the different economic conditions of today.

“China is about to bring on the structural reforms that will ultimately reduce the old SOEs to ashes,” Paul Markowski, President of New York-based MES Advisers and a long-time adviser to China’s financial authorities, told Reuters.

“This is changing the economic policy team in a way that would be akin to bringing back the Clinton economic team to run President Obama’s economic initiatives,” said Markowski, who met with senior officials – including those at the central bank and the powerful planning agency the National Development and Reform Commission (NDRC) – during China’s annual parliamentary meeting this month.

Zhu was credited with getting China into the World Trade Organisation in a move that required shutting thousands of inefficient businesses and ultimately set the nation’s exporters on course to become the world’s most prolific, driving the economy to No.2 spot behind the United States in the process.

The pace of reform hasn’t been matched since, allowing SOEs to expand their share of economic activity and retain their preferred borrower status at the nation’s banks, which critics say starves the private sector of capital and chokes innovation.

The need for an energetic push on economic reform is acute, not least because easier reforms have been done and China’s economy, now more than five times the size it was when Zhu left the stage, will respond in more muted fashion.”

via Analysis: China heads back to the ’90s in economic reform drive | Reuters.

Related articles

Posted in China alert, Economics | Leave a Comment »

Tags: , , , , , , , ,
11/03/2013

* Yuan Flows a More Freely as China Relaxes Controls

WSJ: “The use of China’s yuan abroad is rising as Beijing slowly loosens its grip and allows a wider group of investors to buy the nation’s currency, stocks and bonds.

The offshore yuan in Hong Kong, where the currency is freely traded, is near the highest in a month partly because investors are taking advantage of a slight relaxation in rules on its capital markets. Last week, Beijing allowed Hong Kong units of Chinese banks and insurers, as well as Hong Kong-registered financial institutions, to invest in China’s stocks and bonds for the first time with yuan raised offshore.”

via Yuan Flows a More Freely as China Relaxes Controls – WSJ.com.

Related articles

Posted in China alert, Economics | 1 Comment »

Tags: , , , , ,
09/03/2013

* Some Chinese Seek a Divorce to Avoid Real Estate Tax

NYT: “When the Chinese government announced new curbs on property prices this month, homeowners bombarded social networking sites with complaints. They formed long lines at property bureaus to register to sell their homes before the restrictions went into effect.

And some couples went even further: they filed for divorce.

Divorce filings shot up here and in other big cities across China this past week after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.

The surge in divorce filings is the latest indication of how volatile an issue real estate has become in China in the past decade and how resistant people are to additional taxes.

Worried that housing prices are spiraling out of control and threatening social stability, the central government regularly rolls out measures aimed at damping demand and weeding out speculators.

Then home buyers, sellers, property developers and even local governments — which are typically heavily dependent on land sales for income — try to find ways to get around the restrictions.

“They always do this,” said Du Jinsong, a property analyst in Hong Kong for Credit Suisse. “When they implement new measures, people are always trying to circumvent the rules.”

China’s housing market has been one of the prime engines of economic growth in the past decade, and recently a sharp upturn in prices has reignited fears about inequality and a housing bubble.

On March 1, just days before the opening of China’s annual legislative session, the powerful State Council, which is led by Prime Minister Wen Jiabao, announced a series of new property measures that analysts say unsettled the housing market.

In its statement, the State Council, or cabinet, said that local governments should strictly enforce an earlier rule that ordered people selling a secondary home to pay a 20 percent tax on the profit.

Almost immediately, housing administration bureaus and real estate trading centers in big cities were flooded with people hoping to sell their apartments before the restrictions took effect. (Most local governments have not yet announced a deadline.)”

via Some Chinese Seek a Divorce to Avoid Real Estate Tax – NYTimes.com.

Related articles

Posted in Affluence, China alert, Economics, middle class, real estate | Leave a Comment »

Tags: , , , , , , , , ,
09/03/2013

* Where Have China’s Workers Gone?

Bloomberg: “Xi Jinping and Li Keqiang are taking over China’s leadership at a time when growth has slackened and labor issues have become more complex.

China's Disappearing Surplus Labor

Reports that businesses such as Foxconn Technology Group are raising wages and struggling to recruit workers in China have intensified debate over just how many surplus workers the country still has. Meanwhile, a boom in college-educated Chinese has raised concerns of an impending threat to U.S. competitiveness. These seemingly disparate concerns about China’s labor force are actually linked by common underlying factors, with critical implications for China’s ability to remain the growth engine of the world.

China’s large pool of surplus labor has fueled its rapid industrial growth. Now this “demographic dividend” may be almost exhausted, and its economy reaching a Lewis turning point: a shift named after the Nobel prize-winning Arthur Lewis, who was the first to describe how poor economies can develop by transferring surplus labor from agriculture to the more productive industrial sector until the point when surplus labor disappears, wages begin to rise and growth slows.

Citing periodic labor shortages and unskilled wages that have risen since 2003, prominent Chinese economists suggest that time has come. The International Monetary Fund disagrees and puts the turning point much later — between 2020 and 2025, based on a model analyzing labor productivity. A third view is that China’s surplus labor is still plentiful, given that about 40 percent of the labor force is still underutilized in the rural sector, mostly in agriculture, which accounts for only 10 percent of gross domestic product.

Mobility Restrictions

In China, many market imperfections impede the mobility and use of labor. Thus, actual availability may fall far short of what is potentially available. The hukou residency system that restricts migrant workers from accessing services where they are employed is the most glaring example of this kind of imperfection. Less obvious is the extent to which China’s rural- support policies, including subsidy programs, may be encouraging workers to stay in agriculture longer than they should.

Surplus workers may not be in agriculture as in the original Lewis model but in smaller towns, underemployed at depressed wages. The result is that China has the highest rural- urban income disparity in the world.

Why don’t these workers move to more productive jobs in more dynamic settings? In formal terms, it is because their “reservation wage” has increased — that is, the minimum wage they demand to move is much greater than their current wage, because for a generation that didn’t experience the hardships of the Mao Zedong era, the monetary and emotional costs of relocation have risen. Many workers won’t move to major cities that lack affordable housing. They may also have rights to land that can’t be sold for full market value — thus, staying in familiar surroundings is now a more attractive proposition.

If recent decades saw a huge migration that “brought workers to where the jobs are” along the coast, the future may mean the reverse, involving “bringing the jobs to where the workers are” with profound implications for China’s economic geography.

In lesser known provinces such as Henan, with a country- sized population of 100 million, large numbers of young workers seek factory positions but are unwilling to relocate to seemingly foreign places in coastal China. As China becomes more consumption-oriented with rising incomes and urbanization, the center of economic gravity will naturally move inland where two- thirds of the population resides.

College Graduates

Just as young workers are demanding more satisfying jobs, they also increasingly feel entitled to a college education. Government policy has expanded access to higher education. From 2000 to 2010, the percentage of college-age cohorts enrolled in universities more than tripled in China, a rate of increase far above that of India, Malaysia and Indonesia. China wants to produce 200 million college graduates by 2030; they will make up more than 20 percent of the projected labor force, more than double the current ratio. The push to expand higher education means the number of college-educated has leapfrogged — and excessively so — ahead of those holding only vocational or junior college degrees.

These college-educated workers are unwilling to settle for factory work and compete for office-based positions. College graduates are four times as likely to be unemployed as urban residents of the same age with only basic education, even as factories go begging for semi-skilled workers. Given the underdeveloped service sector and still-large roles of manufacturing and construction, China has created a serious mismatch between skills of the labor force and available jobs.

As the economy moves up the value chain, substituting more capital-intensive manufacturing for unskilled labor-intensive assembly, a shortage of semi-skilled workers is appearing. But the excessive growth of college graduates has outpaced the structural transition and prematurely shifted the labor supply from semi-skilled manufacturing workers to more knowledge- intensive service professionals. More emphasis on vocational training and industry-specific engineering skills will help China fill its immediate need for manufacturing workers.”

Yukon Huang and Clare Lynch are, respectively, a senior associate and a junior fellow at the Carnegie Endowment. The opinions expressed are their own.

via Where Have China’s Workers Gone? – Bloomberg.

Related articles

Posted in China alert, Economics, employment, higher education, labour reform, labour shortage, Migrant workers, Uncategorized, wage rises | 2 Comments »

Tags: , , , , , , , ,
04/03/2013

* China: The next phase of growth

China Policy Institute: “As the new Chinese leadership takes over, their biggest economic challenge remains generating growth for another 30 years. In addition to re-balancing the economy and stimulating more productivity, a key aspect will be the re-defining the role of the state. After over 30 years of marketisation and reform, China remains a mixed picture of state-led policies and a growing number of facially neutral laws with some exemptions for state-owned enterprises.

lyuIn addition, the state-owned commercial banks continue to benefit from official “financial repression” policies, such as the preservation of a spread between lending rates and deposit rates. It helps to generate margins for banks and facilitate their recapitalisation. This policy also enables the state-owned commercial banks to continue to support government policies ranging from fiscal stimulus to supporting state-owned enterprises, though not without cost to overall economic growth as financial repression distorts the allocation of capital.

The high levels of capital formation (some 40% of GDP) in the past two decades and the inefficient allocation of capital away from more productive private firms are worrying. The Twelfth Five Year Plan (2011-15) plans to re-balance the economy towards greater domestic demand and less of a reliance on exports. A key part of the plan is to increase consumption and other parts such as more urbanization and services development would support investment in developing larger urban areas where migrants can settle and government services can be dispersed more efficiently.

This plan in actuality has an implicit 30 year time horizon as these policies of migration, urban development and boosting consumption cannot be achieved in a short time period. Unless China can re-orient its growth model including towards more efficient investments by private firms, then it could find it difficult to sustain a strong growth rate. Part of this challenge will include creating a more secure welfare state.”

via China Policy Institute Blog » The next phase of growth.

Related articles

Posted in China alert, Economics | Leave a Comment »

Tags: , , , , , , , , ,
01/03/2013

* China’s billionaires on rise

China Daily: “China has had more billionaires created by its stock markets this year than in the United States – 212 compared with 211 – a new survey revealed on Thursday.

China's Rich List – The Inside Story

According to the latest Hurun Global Rich List 2013, there were 1,453 people in the world with personal wealth of $1 billion or more at the end of January.

Another significant sign of more wealth being created in the East came with figures showing Asia was home to the highest number of billionaires, with 608, followed by 440 from North America and 324 from Europe, said Hurun researchers.

Among individual countries, the US and the Greater China area dominated with 408 and 357 respectively, followed by Russia, Germany and India.

Between them, the US and China now have half of all billionaires on the planet.

Moscow, with 76 billionaires, is the billionaire capital of the world, followed by New York, Hong Kong, Beijing and London, according to the report.

Mexican telecom czar Carlos Slim, 73, was ranked as the “Richest Man on the Planet” with a personal fortune of $66 billion, followed by US investor Warren Buffett with $58 billion in wealth.

Founder of fashion brand Zara, Amancio Ortega of Spain, shoots into the top three with $55 billion in wealth.

Real estate, telecommunications, media, technology and retail were the most common sources of wealth, the report added.”

via China’s billionaires on rise |Economy |chinadaily.com.cn.

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

Tags: , , , , , , , ,
01/03/2013

* China plans bond overhaul to fund $6 trillion urbanization

Reuters: “China plans major bond market reform to raise the money the ruling Communist Party needs for a 40 trillion yuan ($6.4 trillion) urbanization program to buoy economic growth and close a chasm between the country’s urban rich and rural poor.

A man walks past a construction site for a new stadium in Mentougou district, suburb of Beijing February 28, 2013. REUTERS-Kim Kyung-Hoon

The Party aims to bring 400 million people to cities over the next decade as the new leadership of president-in-waiting Xi Jinping and premier-designate Li Keqiang seek to turn China into a wealthy world power with economic growth generated by an affluent consumer class.

The urban development would be funded by a major expansion of bond markets, sources with leadership ties, and a senior executive at one of China’s “Big Four” state banks, who was formerly at the central bank, told Reuters.

“The urbanization drive will push the domestic capital market liberalization agenda,” the senior bank executive said on condition of anonymity. “Urbanization is Li Keqiang’s big project. He has to get it right and he is willing to pursue innovation to make it a success.”

Set to be confirmed as premier at the end of the annual meeting of China’s rubber-stamp parliament, which opens next week, Li must find ways to pay for the urban development that he has made a policy priority.

Central and local governments, as well as bank loans, will fund the costs, the sources said. But, sweeping reforms to create a fully-functioning municipal bond market, boost corporate and high-yield bond issuance and actively steer foreign capital into the sector, are crucial to raising the sums of money China will need, they added.

Despite its ranking as the second-largest economy globally after three decades of stellar growth, China remains an aspiring middle-income country riven with inequality and dependent on state-backed investment.

“If we continue to walk down the path of government spending, it’ll be like wearing new shoes, but walking the old road,” a source with leadership ties said, requesting anonymity to avoid repercussions for speaking to foreign media without authorization.”

via Exclusive: China plans bond overhaul to fund $6 trillion urbanization – sources | Reuters.

Posted in Chindia Alert, Economics, urban development | 1 Comment »

Tags: , , , , , , , ,
18/02/2013

* Outsourcers turn to China to plug India’s skills gap

The Times: “India is running out of the skilled engineers needed to man its giant software industry, forcing companies to hire staff overseas, especially from China, one of the industry’s pioneers has warned.

An Indian employee at a call centre provides service support to international customers

Kris Gopalakrishnan, the co-founder and executive chairman of Infosys, said that the outsourcing sector was facing a manpower shortage. India, he said, was not producing enough properly trained engineering graduates to meet expanding global demand for its services.

The country may have a population of more than 1.2 billion people, but the dearth of trained graduates is driving up salaries in its IT industry by 15 per cent a year. That, in turn, is eroding the sub-continent’s global competitiveness and forcing companies such as Infosys, Tata Consulting Services and Wipro to invest in finding foreign workers.

“A lot of the tertiary education in India is done by private colleges and there are significant quality issues there,” Mr Gopalakrishnan said.

India produces about 700,000 engineering graduates every year, but of these only about 25 per cent are sufficiently well trained to be considered for a job in IT, Mr Gopalakrishnan said.

Infosys — whose customers include BP, GlaxoSmithKline and Tesco — was planning to treble its workforce in China from 3,500 to more than 10,000 to help cope with constraints at home, where most of its 155,000 staff work.

“Apart from China, there are not many countries in the world where we can recruit large enough numbers,” Mr Gopalakrishnan added. Infosys, which generated revenues of $7 billion last year, already operates large software development and outsourcing operations in Shanghai, Dalian, Beijing, Hangzhou and Jiaxing. The wages in China are higher than in India but are rising at a more modest pace of about 10 per cent annually.

Infosys has also been expanding its overseas presence in other low-cost countries, such as the Philippines, and has explored opportunities in Egypt.

In expanding fields such as data analytics, there are only about 50,000 engineers in India with the right programming skills. Demand is at least five times that number, according to Heidrick & Struggles, a recruitment company.

India’s software and outsourcing industry employs about three million people directly, an increase of 188,000 from a year ago. It generated $75.8 billion in exports in 2012-13, making it India’s largest single export industry, and is continuing to grow at more than 10 per cent a year even as India’s overall rate of economic growth has nearly halved over the past three years, to just over 5 per cent.

Mr Gopalakrishnan said that as well as hiring overseas, Infosys was trying to improve the quality of education in India by funding teacher training programmes at 350 engineering colleges. The group has also built a private campus in the southern city of Mysore capable of training 14,000 students.

“We will have to continue to invest heavily in education and training,” he said.”

via Outsourcers turn to China to plug India’s skills gap | The Times.

See also: https://chindia-alert.org/economic-factors/information-technology/

Related articles

Posted in China alert, Chindia Alert, Digital communications, economic inter-dependence, Economics, higher education, India alert, IT, labour shortage, Outsourcing | Leave a Comment »

Tags: , , , , , , , , , , , , ,
« Older Entries  |   Newer Entries »
CCChang

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