To this very day, China has been given many honourable tags varying from the economic engine of the world to the global factory of most goods. However, will all this change for the better with the changing economic environment?
It seems like the answer is Yes. This response comes amidst the European Commissioner Chief Joe Manuel Barroso latest comments. "I very much hope that China gives an important contribution to the solution of this financial crisis. It's a great opportunity for China to show a sense of responsibility," he said. "It's very simple: we sink together or we swim together." One needs to look at the implications of this statement in order to address the potential for China to change its economic status.
If China were to contribute greatly to the economic downturn, it seems like it would further strengthen existing ties with Europe. This comment is not without basis since Angela Merkel has recently illustrated her intentions by stating that "cooperation with China is of utmost importance" for Germany. This cooperation is also important to China with the Chinese Premier Wen Jiabao stating that "cooperation with Germany was "extremely important" and that China "counts on investment from Germany."
In relation to Barroso's latter comment of "we sink together or swim together" relates to the economic downturn as global rather than limited to Europe and other western countries. His comment isn't unfounded since At one stage Japan's Nikkei was down 7%, its lowest for the past five years.In Australia, amid fears of global recession the Sydney stock market was down 4.4%.In Korea shares were down 7% and in Hong Kong the Hang Seng closed 4.7% down. It seems like from these figures a solution for the global economic crisis will create unprecedented rewards for China. The rewards come in the form of a better global image, which is specific to Europe and a possible threshold of other business ventures in China.
Thursday, 23 October 2008
Wednesday, 15 October 2008
Global downturn effecting China?
The economic downturn is described as a recession and this means that real domestic product growth is negative for two or more consecutive quarters. The effects of the credit crunch has seen many emerging countries like Brazil and Russia suffer big capital outflows. In addition, the effects are more prevalent in the United Kingdom, with the government recently injecting £20 billion into RBS as its share price fell to an all time low of 63p per share. This means that the UK taxpayer is shedding out £1360 every year but more significantly 46% of RBS is owned by the state. These astonishing figures suggest a bleak outlook for the United Kingdom but how has it effected China.
China has become the engine of the global economy accounting for 1/3 of global GDP and there are signs that the global downturn has effected China but to what extent? Export volumes have slowed markedly; the growth of industrial production dropped to a six-year low in the 12 months to August; car sales fell by 6% in the same period. In addition, property sales in big cities have shrunk by around 50% over the past year. In Shenzhen prices of new luxury apartments have fallen by up to 40%.
However, large losses in the property market are better managed by Chinese banks than those in the USA since Chinese banks' loans amount to only 65 percent of their deposits, compared with far higher ratios in America and Western Europe. Moreover, In America it was easy to get a mortgage for 100 percent or more of the value of a home, but Chinese buyers must put down a minimum deposit of 20-30 percent, depending on the home's size, and as much as 40 percent on second homes. This provides banks with a large buffer as prices fall. Loans to property developers are riskier and banks' profits will be hurt as developers go bust. But according to Wang Tao, an economist at UBS, these loans account for only 7 percent of total bank lending.
Chinese consumer spending actually strengthened this summer, with retail sales rising by 17 percent in real terms in the year to August. The government also has room for maneuver. Inflation, which had been its main concern, fell to 4.9 percent in the year to August from 8.7 percent in February.
China has ample room for a stimulus because it boasts the healthiest fiscal position of any big economy. According to Stephen Green, an economist at Standard Chartered, it has a budget surplus of 2 percent of GDP, if measured in the same way as in rich economies, and public-sector debt is a mere 16 percent of GDP.
In conclusion, the global downturn has effected China in terms of its export and properties market. Although, the extent is not so great compared to the United Kingdom and other countries since its banking infrastructure has prohibited the extensive use of loans. This in turn has enabled the Chinese government to weather the global downturn and mitigate the effects of the global downturn.
China has become the engine of the global economy accounting for 1/3 of global GDP and there are signs that the global downturn has effected China but to what extent? Export volumes have slowed markedly; the growth of industrial production dropped to a six-year low in the 12 months to August; car sales fell by 6% in the same period. In addition, property sales in big cities have shrunk by around 50% over the past year. In Shenzhen prices of new luxury apartments have fallen by up to 40%.
However, large losses in the property market are better managed by Chinese banks than those in the USA since Chinese banks' loans amount to only 65 percent of their deposits, compared with far higher ratios in America and Western Europe. Moreover, In America it was easy to get a mortgage for 100 percent or more of the value of a home, but Chinese buyers must put down a minimum deposit of 20-30 percent, depending on the home's size, and as much as 40 percent on second homes. This provides banks with a large buffer as prices fall. Loans to property developers are riskier and banks' profits will be hurt as developers go bust. But according to Wang Tao, an economist at UBS, these loans account for only 7 percent of total bank lending.
Chinese consumer spending actually strengthened this summer, with retail sales rising by 17 percent in real terms in the year to August. The government also has room for maneuver. Inflation, which had been its main concern, fell to 4.9 percent in the year to August from 8.7 percent in February.
China has ample room for a stimulus because it boasts the healthiest fiscal position of any big economy. According to Stephen Green, an economist at Standard Chartered, it has a budget surplus of 2 percent of GDP, if measured in the same way as in rich economies, and public-sector debt is a mere 16 percent of GDP.
In conclusion, the global downturn has effected China in terms of its export and properties market. Although, the extent is not so great compared to the United Kingdom and other countries since its banking infrastructure has prohibited the extensive use of loans. This in turn has enabled the Chinese government to weather the global downturn and mitigate the effects of the global downturn.
Sunday, 5 October 2008
Lung disease endemic for the future.....
A recent study carried out by the Harvard School for Public Health has predicted that 80 million chinese people will die of lung disease in the next 25 years. The study is to last 30 years and the first 5 years of the project has seen drastic predictions.
This is not the only indication that lung disease may become China's future problem. It is reported that 1 in 3 cigarettes are smoked in China and Dr Sarah England, who is the technical director of the World Health Organisation for combating tobacco related problems, has said 1 million chinese people will die every year from tobacco related illnesses. The tobacco problem seems to have deeper roots in chinese society with over 40% of doctors smoking and over 45% of them smoke in front of patients. This suggests that China has failed to even notice a tobacco problem amongst its people.
However, tobacco isn't the only source of lung disease in China since the problem is also created by the use of solid fuels like wood being used for cooking and heating. It is reported that 70% of households use such fuels and this is contributing to the problem.
The drastic predictions has seen the growth of solutions, which might become significant in China's future character. Prof. Majid Ezzati has suggested the development of air circular stoves and better chimneys across China. In addition, the tobacco issue could be tackled through taxation, more health education, and advertising more bans.
Michael R. Bloomberg and Bill Gates have put up $500 million toward an anti-smoking campaign targeting the 15 countries with the worst tobacco problems, including China, India and Indonesia. It will use a comprehensive strategy focused on raising tobacco taxes; banning tobacco ads and promotion; limiting secondhand smoke; educating people about tobacco's hazards; and helping smokers quit.
In conclusion, one can see that the figures are astonishing and strongly suggest that lung disease may become endemic in the future. Although, the study and various other reports are likely to increase awareness of the problem but the key uncertainty lies as to what extent and this will determine whether it will be an endemic or not.
This is not the only indication that lung disease may become China's future problem. It is reported that 1 in 3 cigarettes are smoked in China and Dr Sarah England, who is the technical director of the World Health Organisation for combating tobacco related problems, has said 1 million chinese people will die every year from tobacco related illnesses. The tobacco problem seems to have deeper roots in chinese society with over 40% of doctors smoking and over 45% of them smoke in front of patients. This suggests that China has failed to even notice a tobacco problem amongst its people.
However, tobacco isn't the only source of lung disease in China since the problem is also created by the use of solid fuels like wood being used for cooking and heating. It is reported that 70% of households use such fuels and this is contributing to the problem.
The drastic predictions has seen the growth of solutions, which might become significant in China's future character. Prof. Majid Ezzati has suggested the development of air circular stoves and better chimneys across China. In addition, the tobacco issue could be tackled through taxation, more health education, and advertising more bans.
Michael R. Bloomberg and Bill Gates have put up $500 million toward an anti-smoking campaign targeting the 15 countries with the worst tobacco problems, including China, India and Indonesia. It will use a comprehensive strategy focused on raising tobacco taxes; banning tobacco ads and promotion; limiting secondhand smoke; educating people about tobacco's hazards; and helping smokers quit.
In conclusion, one can see that the figures are astonishing and strongly suggest that lung disease may become endemic in the future. Although, the study and various other reports are likely to increase awareness of the problem but the key uncertainty lies as to what extent and this will determine whether it will be an endemic or not.
Wednesday, 1 October 2008
Melamanic China
Melamine is a nitrogen(66%) based toxic, which tends to cause reproductive damage, kidney or bladder stones leading to possible cancer in the long term.
The recent economic news has been the surge of Melamine in various dairy products across China and this has had a significant effect on business activities locally and globally. On a local level, Heinz has withdrawn 270 cases of baby food and declared thats its milk supply will be diverted to non-chinese sources. The global level has seen the European Commission test all dairy products with more than 15% milk powder. In addition, the commission has imposed a ban on all EU imports of chinese baby food. However, one must not forget the impact it has on human life with the death of four babies and over 53,000 ill.
The milk sector in China is worth over $20bn in less than 5 years and this figure illustrates the scope of China's strength but with the current commercial actions in China, this figure maybe rapidly declining.
Trust plays a major role in strengthening business ties with the West to entice investments in China but with recent events has that trust been lost. If one looks at the figures, it has rocked such relations with 12% of milk products in China containing melamine. In addition, the leading quality control in China has reported that of the 265 products tested in China 11.7% of them contain the chemical. Various sources give their figures but the highest being reported so far is 20%.
The source of the problem has been reported to be on the conditions of the market with many milk farmers being small firms unable to influence the market in terms of price and quality control. This has subsequently resulted in the middle men, who are the purchasers placing pressures on the farmers to produce more and more in order to cut down price and maximize profit. This has resulted in the farmers diluting the milk by 30% and becoming more vulnerable to contamination.
The recent economic news has been the surge of Melamine in various dairy products across China and this has had a significant effect on business activities locally and globally. On a local level, Heinz has withdrawn 270 cases of baby food and declared thats its milk supply will be diverted to non-chinese sources. The global level has seen the European Commission test all dairy products with more than 15% milk powder. In addition, the commission has imposed a ban on all EU imports of chinese baby food. However, one must not forget the impact it has on human life with the death of four babies and over 53,000 ill.
The milk sector in China is worth over $20bn in less than 5 years and this figure illustrates the scope of China's strength but with the current commercial actions in China, this figure maybe rapidly declining.
Trust plays a major role in strengthening business ties with the West to entice investments in China but with recent events has that trust been lost. If one looks at the figures, it has rocked such relations with 12% of milk products in China containing melamine. In addition, the leading quality control in China has reported that of the 265 products tested in China 11.7% of them contain the chemical. Various sources give their figures but the highest being reported so far is 20%.
The source of the problem has been reported to be on the conditions of the market with many milk farmers being small firms unable to influence the market in terms of price and quality control. This has subsequently resulted in the middle men, who are the purchasers placing pressures on the farmers to produce more and more in order to cut down price and maximize profit. This has resulted in the farmers diluting the milk by 30% and becoming more vulnerable to contamination.
Monday, 29 September 2008
A new age of global dominance?
For the last couple of days, China has once again amazed the world by launching a rocket into space and this is combined with the not so late Olympic ceremony. Are these significant events a sign of things to come? A sign that China is growing birth to a new age of dominance? One might say yes because of the economic events happening in America with Lehman brothers becoming insolvent and a number of other banks like AIG and Merrill Lynch needing state help.
The effects of the sub-prime mortgages crisis has effected everyone economically with share prices in the Far east dropping, but yet China continues to amaze people with their new feats. Is this dominance? Dominance is apparent when a country can withstand an economic crisis and still continue to grow in the light of such a depression. If one applies this definition, then it would be correct to say that China is at the forefront of a new age of dominance.
However, are these events just superficial or propaganda? How are China funding such activities? is the funding coming from state credit or is the supposed age of dominance just a short term fuse?
The effects of the sub-prime mortgages crisis has effected everyone economically with share prices in the Far east dropping, but yet China continues to amaze people with their new feats. Is this dominance? Dominance is apparent when a country can withstand an economic crisis and still continue to grow in the light of such a depression. If one applies this definition, then it would be correct to say that China is at the forefront of a new age of dominance.
However, are these events just superficial or propaganda? How are China funding such activities? is the funding coming from state credit or is the supposed age of dominance just a short term fuse?
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