continuously updated blog about China & India
You will be living in their world, very soon
Beware the Waking Dragon
New economic data casts dark clouds over economic revival
The Consumer Price Index increased from 7.46% in June to 7.96% in July, according to data released by the government on Tuesday. The CPI measures the change in market price levels for a representative basket of goods and services purchased by households. Meanwhile, overall factory output has decelerated by 1.8% in June to 3.4% due to a sharp decrease in the manufacturing activity.
Most of China’s provinces are ahead of schedule or on track to meet 2015 energy savings targets, the government said on Friday, with Beijing and Shanghai among the frontrunners as the world’s No.2 economy seeks to reduce its impact on the environment.
China has pledged to reduce its energy intensity – the amount of energy it uses to add a dollar to its gross domestic product (GDP) – to 16 percent below 2010 levels by 2015.
Beijing’s intention in setting the targets was to slow emissions of climate-changing greenhouse gases and cut expensive fuel imports, but they have won new relevance with the pollution crisis that has enveloped the nation the past two years.
via China provinces on track to meet 2015 energy targets: NDRC | Reuters.
TWO examples of the infrastructure that has helped make China a mighty trading power can be found on the outskirts of Shanghai: Yangshan, the world’s busiest container port, and Pudong airport, the world’s third-biggest handler of air cargo. Radiating out across the country are more than 100,000km (62,000 miles) of expressways and a comparable length of railways. Given all this new infrastructure, you might expect China to have a world-class logistics industry, too. It does not.
Logistics covers transportation, warehousing and the management of goods. Its Chinese translation, wu liu, literally means “the flow of things”. But that flow within the country is costly and cumbersome. Much of the investment in infrastructure has gone to lubricate exports. Now, as China’s government shifts its focus to consumption at home it is finding that the domestic logistics industry is woefully inefficient.
Logistics spending is roughly equivalent to 18% of GDP, higher than in other developing countries (India and South Africa spend 13-14% of GDP) and double the level seen in the developed world. Li Keqiang, the prime minister, recently echoed industry’s complaints that sending goods from Shanghai to Beijing can cost more than sending them to America.
Most warehouses are old and unmechanised. Goods are transferred up to a dozen times from vehicle to vehicle as they make their way across the country. There are no cargo hubs that help link freight from rail to road. The decrepit and overloaded lorries that ply the new highways are unable to find a return cargo on more than one third of their trips.
China has over 700,000 trucking operators, most of them one-man outfits. (America has about 7,000.) Scale is essential to the business, but the top 20 firms together make up barely 2% of the market. Nancy Qian of KXTX, a logistics firm, observes that companies compete so fiercely on price that most barely make any money, and so lack the funds needed to modernise or achieve economies of scale.
The industry is carved into niches, making it hard for integrated service providers to emerge. Sleepy state-owned enterprises such as Sinotrans and China Post control the markets for air freight and domestic post. Foreign express-delivery firms are salivating over the market but FedEx and UPS, for example, have been granted only limited licences for domestic delivery. More importantly, foreign firms are burdened with high costs that make it hard to compete for frugal customers against lean local rivals.
For all firms, local or foreign, a tangle of regulations, local protectionism and corruption makes getting goods across China a problem. Logistics, broadly defined, falls under the authority of nine ministries and commissions. Local governments often levy taxes on operators and demand they obtain special licences to operate. There are also heavy tolls on China’s roads, and lorries are restricted from entering most urban areas so must transfer goods onto smaller vehicles.
via Logistics: The flow of things | The Economist.
Prime Minister Narendra Modi’s government has its work cut out if it wants to transform the country’s health system and provide a universal health insurance programme.
India has just 0.7 doctors per 1,000 people, and 80 percent of this workforce is in urban areas serving 30 percent of the population, according to industry lobby group NATHEALTH.
Less than 25 percent of the population has access to any form of health insurance. And India’s public and private expenditure on health is around 4 percent of its GDP, the lowest among BRICS countries.
India is seeing a rise in lifestyle diseases and is on its way to become the world’s diabetes capital with more than 60 million diabetics, a number that the Research Society for the Study of Diabetes in India (RSSDI) estimates will cross 85 million in 2030, or nearly 8 percent of the population today.
India Insight spoke to stakeholders in the healthcare sector about their wishlist for the budget. Edited excerpts:
Dr. Jitendra B. Patel, President, Indian Medical Association
“Impetus has to be given to preventive aspect of treatment. Safe drinking water and sanitation are the two important things which are to be addressed immediately. Primary care should be given more budget than secondary care. For a developing country like India, corporate culture is not going to help the people. We have to serve the poor people.
“Also, the ratio of doctors must increase. For that, more and more medical colleges are the need of the hour.”
via Budget 2014: Wishlist from healthcare sector | India Insight.
Optimism abounds in India following Narendra Modi’s unexpectedly strong election victory. It’s still early days, but the new government’s priorities and coherence are a breath of fresh air.
As India’s economy gets back on its feet, one question is whether the recovery will be shaped like a U, a V or a square root. In other words: Can growth rebound as quickly and strongly as it did after the global financial crisis?
Unfortunately, the answer is no: India’s recovery will be gradual and uneven, at least in the near term. Growth will accelerate sharply from fiscal 2016 onward.
It’s worth recalling the sting from the global financial crisis. Gross domestic product growth, as measured by production, plunged to 5.8% on-year in the final quarter of 2008, from 9.8% in the second quarter. Growth in expenditure GDP – a less reliable measure – dropped even more, to 1.5% on-year from 8.1%.
The main casualty was growth in gross fixed capital formation, which typically enhances an economy’s productive capacity. This fell from 13.9% in the second quarter to 2.1% in the fourth quarter – then declined by nearly 10% in early 2009.
Afterward, both capital formation and GDP recovered rapidly in a classic V-shaped pattern. Production GDP growth, which fell to 6.7% in fiscal 2009, averaged 8.8% a year in the next two fiscal years. Gross fixed capital formation averaged nearly 10% growth per year in fiscal 2010 and 2011, a swift recovery that hinted the economy was once again on an elevated trajectory — though policy paralysis later shortchanged it.
via Plotting the Shape of India’s Recovery – India Real Time – WSJ.
Earlier this month, financial analysts from Japan-based Nomura Group (NMR) issued a grim report on China’s housing market: “To us, it is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” the report read.
Nomura—which has historically been bearish on China, as the Wall Street Journal observes—predicted that a downturn in the housing market, caused by oversupply and shrinking developer financing, could sharply impact China’s economy, perhaps even driving GDP growth to less than 6 percent in 2014.
China’s economy is vulnerable because property investment accounts for anywhere from 16 percent to 20 percent of gross domestic product, according to varying analyses.
via Is China’s Housing Bubble Beginning to Burst? – Businessweek.
Even as China’s economy continues to show signs of a slowdown, Beijing has avoided rolling out any big new stimulus programs; that’s in direct contrast to its pump-priming response during the 2008 global financial crisis.
Why the apparent lack of worry? It’s got everything to do with jobs. In the first quarter, China created 3.44 million new urban jobs, 40,000 more than a year earlier. China has said for the full year it wants to create at least 10 million new positions—that target now looks easily reachable.
“GDP growth has halved since peaking above 14 percent in 2007. But, with a greater share of output coming from more labor-intensive sectors, and the economy itself much larger, more new jobs are being created today,” wrote economists Mark Williams, Qinwei Wang, and Julian Evans-Pritchard, at London-based Capital Economics, in a May 2 note.
via Why China Isn’t Worried About Slowing GDP: Jobs Strength – Businessweek.
Let’s assume, for the sake of argument, that China’s economy is on the verge of surpassing the U.S. economy in size. (By one measure, anyway—purchasing power parity as calculated by the World Bank’s International Comparison Program.) What does it mean?
Start with what it doesn’t mean. It doesn’t mean China is rich. All that gross domestic product has to be spread around more than a billion people. On a per-capita basis, the highest-income country in the world in 2011 was the oil-soaked and lightly populated Gulf monarchy of Qatar, at $146,000 per person. The U.S., as this chart shows, was No. 12, at just under $50,000.
China? China was No. 101, at a little less than $10,000 per capita. It’s not labeled on the chart, but if it were, it would appear between Serbia and Dominica.
via The U.S. Is Big and Rich. China Is Just Big – Businessweek.
As a teenager, Ram Singh left this remote rural village and moved to fast-growing New Delhi to chase the spoils of his country’s economic boom.
For 14 years, he toiled in tiny, primitive factories making everything from auto parts to components for light switches. His wages barely kept pace with the cost of living and eventually he gave up on city life.
Today, he is back on the farm, scratching out a living from a small plot of land near his birthplace where he grows corn, wheat, potatoes and mustard.
“Whenever someone leaves his village for the city, he thinks, ‘I will earn money,'” says Mr. Singh, who isn’t certain of his age but says he is around 30 years old. “Everyone has dreams, but it’s not always in their power to turn them into reality.”
Just a few years after India was hailed as a rising economic titan poised to rival China—even surpass it—growth in gross domestic product has slowed to a pace not seen in a decade. The Indian economy expanded at an annual rate of 4.7% in the last quarter of 2013. That may be sizzling by Western standards, but it is a serious comedown for a country whose GDP growth peaked at 11.4% in 2010. Inflation is high, workers aren’t finding jobs, and industrialization and urbanization are stalling.
via As Growth Slows in India, Rural Workers Have Fewer Incentives to Move to Cities – WSJ.com.
As China frets about meeting its target of about 7.5 percent growth in 2014, it’s time for more stimulus. The State Council, China’s cabinet, announced plans this week to further expand railways across the country, renovate dilapidated urban housing, and provide new tax breaks for small businesses. Many analysts are expecting a return to looser credit policies this year as well.
But what China considers unacceptable levels of gross domestic product growth would be the envy of most other countries. So why do China’s leaders demand such rapid rates of economic expansion?
A clue to that is found in Premier Li Keqiang’s recent work report, China’s version of a state of the union speech. Creating enough jobs—mentioned 11 times in the document released on March 5—is what drives Chinese officials’ obsession with fast-rising GDP.
China needs high levels of growth—at least 7 percent, says Li—to ensure enough jobs for 7.2 million college grads and 10 million people flooding cities from the countryside every year. China’s leaders have set a target of producing at least 10 million jobs this year, and a record-high 13.1 million urban jobs were added last year. “Employment is the basis of people’s well-being,” Li said in the work report. “We will steadfastly implement the strategy of giving top priority to employment.”
The trouble is, new stimulus mainly means more investment-driven expansion, which already accounts for about half of the economy. That’s problematic given industrial overcapacity and soaring debt levels held by local governments and companies. And while it indeed boosts the headline GDP number, it doesn’t always create lots of jobs. Heavy industries such as steel, aluminum, and real estate construction, which have rapidly expanded particularly in the years following China’s 2009 stimulus, tend to be capital-intensive rather than labor-intensive.
The country has struggled in recent years to substantially boost the portion of its economy driven by consumption and the job-creating service sector. The plan to cut taxes may provide some support toward that goal. Unfortunately, more train tracks and urban housing may instead set China back.
via Why China Needs Such Rapid GDP Growth: More Jobs – Businessweek.
continuously updated blog about China & India
continuously updated blog about China & India
continuously updated blog about China & India
CHINDIA ALERT: You'll be living in their world, very soon 