ECONOMIST:CHINA’s lunar new year sees the world’s largest migration, as tens of millions of workers flock home. Deserting for a few days the factories that make the goods that fill the world’s shops, they surge back to their native villages. This week, however, as they feasted to the deafening rattle of the firecrackers lit to greet the Year of the Ox, their celebrations had an anxious tinge (see article). Many will not have jobs to go back to.
Some Asians are blaming the West. The Western consensus in favour of globalisation lured them, they say, into opening their economies and pursuing export-led growth to satisfy the bottomless pit of Western consumer demand. They have been betrayed. Western financial incompetence has trashed the value of their investments and consumer demand has dried up. This explanation, which absolves Asian governments of responsibility for economic suffering, has an obvious appeal across the region.
Awkwardly, however, it tells only one part of the story. Most of the slowdown in regional economic growth so far stems not from a fall in net exports but from weaker domestic demand. Even in China, the region’s top exporter, imports are falling faster than exports.
Yet infrastructure spending alone is not a long-term solution. This sort of stimulus will sooner or later become unaffordable, and growth based on it will run out of steam. To get onto a sustainable long-term growth path—and to help pull the rest of the world out of recession—Asia’s economies need to become less dependent on exports in other ways.
Asian governments must introduce structural reforms that encourage people to spend and reduce the need for them to save. In China, farmers must be given reliable title to their land so that they can borrow money against it or sell it. In many countries, including China, governments need to establish safety-nets that ease worries about the cost of children’s education and of health care. And across Asia, economies need to shift away from increasingly capital-intensive manufacturing towards labour-intensive services, so that a bigger share of national income goes to households.
Friday, January 30, 2009
Saturday, January 24, 2009
china - currency valuation
WSJ:On Thursday, President Obama's nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency." No Chinese official of Mr. Geithner's standing has fired back -- a move analysts say shows that China doesn't want to overreact to the statement -- but Saturday morning an official from China's Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade." The statement, provided by an official from the ministry's news department, also said China would not "rely on devaluations" of its currency, the yuan, to promote exports.
Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China's trade-dependent economy. Mr. Geithner's comments marked a significant escalation in U.S. criticism of China's exchange-rate system.In recent years, China did let the yuan strengthen, but stopped last year as its economy weakened. Some analysts have expressed concern that Beijing might let the yuan weaken, although Chinese officials have ruled that out.
Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China's trade-dependent economy. Mr. Geithner's comments marked a significant escalation in U.S. criticism of China's exchange-rate system.In recent years, China did let the yuan strengthen, but stopped last year as its economy weakened. Some analysts have expressed concern that Beijing might let the yuan weaken, although Chinese officials have ruled that out.
India not facing recession: Chidambaram
toi:Union home minister P Chidambaram on Saturday said India is not facing recession but only a slowdown.
Delivering a lecture after launching the Bharatiya Yuva Shakthi Trust here, he said manufacturing was facing a sharper slowdown. "We have to take counter-(measures) and sometimes corrective measures to ensure high domestic demand. While the government is taking fiscal measures, the RBI is taking monetary measures," the home minister said.
Stating that there was some "monetary shock" due to the drying up of overseas as well as non-banking lending, Chidambaram said the public sector banks handled the larger portion of loans.
Delivering a lecture after launching the Bharatiya Yuva Shakthi Trust here, he said manufacturing was facing a sharper slowdown. "We have to take counter-(measures) and sometimes corrective measures to ensure high domestic demand. While the government is taking fiscal measures, the RBI is taking monetary measures," the home minister said.
Stating that there was some "monetary shock" due to the drying up of overseas as well as non-banking lending, Chidambaram said the public sector banks handled the larger portion of loans.
Monday, January 19, 2009
GAME, SET, MATCH !
Tennis, once known tobe a rich man's game has huge fan followers these days thanks to the media popularity. Just few weeks back, I had the once in a lifetime opputunity to watch some of that action right here in doha in the company of my family & friends. Thank you QTF.
One of my close friends got a signature ball & wrist band from Federer....lucky....grrrrrrrrrrrrr.
Australian open just got started today in melbourne & our sania didi has registered a win. Somdev bhaiya where r u???? Millions of indians are waiting to hear more from him.
Some cricket action starts too this week..........thank god for this distraction from the current financial crisis. By the way I also heard many richies have decided to slow down their shopping for sometime, sensible right?
One of my close friends got a signature ball & wrist band from Federer....lucky....grrrrrrrrrrrrr.
Australian open just got started today in melbourne & our sania didi has registered a win. Somdev bhaiya where r u???? Millions of indians are waiting to hear more from him.
Some cricket action starts too this week..........thank god for this distraction from the current financial crisis. By the way I also heard many richies have decided to slow down their shopping for sometime, sensible right?
Saturday, January 17, 2009
Factory Closures Strain China's Labor Law
WSJ:SHENZHEN, China -- The global economic downturn is testing China's efforts to improve labor laws, pitting the need to give basic legal protections to 700 million workers against the need to keep businesses afloat.
The country's economic emergence boosted incomes, but also led to complaints that workers' rights were being trampled. In response, the central government in January 2008 introduced workplace-protection legislation, known as the Labor Contract Law. The law sought to tighten job security, to make dismissing workers more difficult, and to guarantee severance pay of one month's salary for each year of employment. Last year, China added new job-discrimination laws and made it easier to file complaints against employers.
But as the global financial crisis hits the heart of the world's factory floor, labor activists say officials are turning a blind eye to the new requirements. Local governments deny they are becoming lax, yet complaints against employers languish in huge backlogs as many are simply shuttering their factories.
Migrant workers who returned home from China's Guangdong Province after losing their jobs look for work at a labor market in Chengdu. One worker advertises that he will take any job.
"The enforcement of the Labor Contract Law is facing new problems," Hua Jianmin, chairman of the National People's Congress Standing Committee, China's top legislative body, said last month at a meeting on the law.
One problem is that China's manufacturing sector contracted for the fifth consecutive month in December, according to the CLSA China Purchasing Managers Index.
"Pressures from the labor law may encourage factories to close rather than pay what they owe to workers under the law," says Liu Kaiming, executive direct at the Institute of Contemporary Observation, a Shenzhen-based labor group.
Write to Sky Canaves at sky.canaves@wsj.com
The country's economic emergence boosted incomes, but also led to complaints that workers' rights were being trampled. In response, the central government in January 2008 introduced workplace-protection legislation, known as the Labor Contract Law. The law sought to tighten job security, to make dismissing workers more difficult, and to guarantee severance pay of one month's salary for each year of employment. Last year, China added new job-discrimination laws and made it easier to file complaints against employers.
But as the global financial crisis hits the heart of the world's factory floor, labor activists say officials are turning a blind eye to the new requirements. Local governments deny they are becoming lax, yet complaints against employers languish in huge backlogs as many are simply shuttering their factories.
Migrant workers who returned home from China's Guangdong Province after losing their jobs look for work at a labor market in Chengdu. One worker advertises that he will take any job.
"The enforcement of the Labor Contract Law is facing new problems," Hua Jianmin, chairman of the National People's Congress Standing Committee, China's top legislative body, said last month at a meeting on the law.
One problem is that China's manufacturing sector contracted for the fifth consecutive month in December, according to the CLSA China Purchasing Managers Index.
"Pressures from the labor law may encourage factories to close rather than pay what they owe to workers under the law," says Liu Kaiming, executive direct at the Institute of Contemporary Observation, a Shenzhen-based labor group.
Write to Sky Canaves at sky.canaves@wsj.com
Sunday, January 11, 2009
India's Enron - Satyam Computers
ECONOMIST: SATYAM means “truth” in Sanskrit, an ancient Indian language. On January 7th Satyam Computer Services, one of the country’s biggest software and services companies, revealed some alarming truths about Indian capitalism, even in its spiffiest industry. The company’s founder and chairman, B. Ramalinga Raju, confessed to a $1.47 billion fraud on its balance sheet, which he and his brother, Satyam’s managing director, had disguised from the company’s board, senior managers and auditors for several years. “It was like riding a tiger, not knowing how to get off without being eaten,” Mr Raju wrote.
The tiger carried Mr Raju deep into the woods. Quarter after quarter, he inflated Satyam’s profits, even as operations expanded and costs grew. The company, which is listed on both the New York Stock Exchange (NYSE) and the Bombay Stock Exchange, now claims to have 53,000 employees, and customers in 66 countries, including 185 companies in the Fortune 500. In its books for the third quarter it reported 50.4 billion rupees ($1.03 billion) of cash and 3.76 billion of earned interest that do not in fact exist. It also understated its liabilities by 12.3 billion rupees and overstated the money it is owed by 4.9 billion.
The ride took a final turn on December 16th, when Mr Raju tried to buy two firms owned by his family, Maytas Properties and Maytas Infra, for $1.6 billion. Satyam’s supine board approved the proposal but shareholders revolted. They thought it was a brazen attempt to siphon cash out of Satyam, in which the Raju family held a small stake, into firms the family held more tightly. In fact, it turns out, it was Mr Raju’s last desperate attempt to plug the hole in Satyam’s balance sheet with Maytas’s assets.
The deal was swiftly aborted. In the aftermath, four non-executive directors quit, hoping to salvage their own credibility, and Mr Raju’s creditors came knocking. They dumped most of the Satyam shares he had pledged as collateral for the 12.3 billion rupees in loans. The ride was over. The daunting task of rescuing Satyam falls to Ram Mynampati, its chief operating officer, who is now interim chief executive.
The task of rehabilitating corporate India is equally daunting. It has long basked in the reflected glory of its information-technology firms. Run by cerebral, clean-living professionals, they employ India’s brightest youngsters and serve the bluest of blue-chip companies. These digital ambassadors have lent corporate India a certain “mystique”, says Sharmila Gopinath of the Asian Corporate Governance Association (ACGA), based in Hong Kong. But that reputation rests largely on the efforts of one or two companies, such as Infosys, which are impeccably run. Investors delude themselves if they think standards in most Indian technology firms, let alone the rest of its 9,000 listed companies, are close to those set by Infosys.
The illusion persists because it is not easy to gauge corporate governance objectively. ACGA’s own 2007 ranking of corporate governance placed India third out of 11 Asian countries, behind Hong Kong and Singapore, but far ahead of China, in ninth place. India’s financial-reporting standards are high, its principal regulator, the Securities and Exchange Board of India, is independent of the government, and its business press is enthusiastic. But enforcement is weak, loopholes large, and shareholder activism is lacklustre. “There is virtually no voting by poll at AGMs”, ACGA notes, “and meetings are often held in remote locations.”
The government has introduced a new companies bill, which would allow shareholders to pursue class-action lawsuits, but it will probably lapse when elections are called some time before May. Even if a new government passes the legislation, India’s cumbersome courts tend to delay justice to the point of denying it.
New laws may matter less than the spirit that animates them. Satyam’s independent directors, for example, met the standards set by the NYSE. But they did not ask hard questions. Directors in India may sit on as many as 15 boards, which leaves them little time to do their job properly.
But even an assertive board and reputed auditors will struggle to stop managers who are determined to hide their dirty laundry from view. About half of the 30 companies in the Sensex, India’s benchmark stockmarket index, are run by business families, most of who trace their roots back to the closed economy of India’s past. “They don’t always understand the new rules,” says Ms Gopinath. “Until investors stand up and say these practices are unacceptable, what reason do companies have to change?”
The tiger carried Mr Raju deep into the woods. Quarter after quarter, he inflated Satyam’s profits, even as operations expanded and costs grew. The company, which is listed on both the New York Stock Exchange (NYSE) and the Bombay Stock Exchange, now claims to have 53,000 employees, and customers in 66 countries, including 185 companies in the Fortune 500. In its books for the third quarter it reported 50.4 billion rupees ($1.03 billion) of cash and 3.76 billion of earned interest that do not in fact exist. It also understated its liabilities by 12.3 billion rupees and overstated the money it is owed by 4.9 billion.
The ride took a final turn on December 16th, when Mr Raju tried to buy two firms owned by his family, Maytas Properties and Maytas Infra, for $1.6 billion. Satyam’s supine board approved the proposal but shareholders revolted. They thought it was a brazen attempt to siphon cash out of Satyam, in which the Raju family held a small stake, into firms the family held more tightly. In fact, it turns out, it was Mr Raju’s last desperate attempt to plug the hole in Satyam’s balance sheet with Maytas’s assets.
The deal was swiftly aborted. In the aftermath, four non-executive directors quit, hoping to salvage their own credibility, and Mr Raju’s creditors came knocking. They dumped most of the Satyam shares he had pledged as collateral for the 12.3 billion rupees in loans. The ride was over. The daunting task of rescuing Satyam falls to Ram Mynampati, its chief operating officer, who is now interim chief executive.
The task of rehabilitating corporate India is equally daunting. It has long basked in the reflected glory of its information-technology firms. Run by cerebral, clean-living professionals, they employ India’s brightest youngsters and serve the bluest of blue-chip companies. These digital ambassadors have lent corporate India a certain “mystique”, says Sharmila Gopinath of the Asian Corporate Governance Association (ACGA), based in Hong Kong. But that reputation rests largely on the efforts of one or two companies, such as Infosys, which are impeccably run. Investors delude themselves if they think standards in most Indian technology firms, let alone the rest of its 9,000 listed companies, are close to those set by Infosys.
The illusion persists because it is not easy to gauge corporate governance objectively. ACGA’s own 2007 ranking of corporate governance placed India third out of 11 Asian countries, behind Hong Kong and Singapore, but far ahead of China, in ninth place. India’s financial-reporting standards are high, its principal regulator, the Securities and Exchange Board of India, is independent of the government, and its business press is enthusiastic. But enforcement is weak, loopholes large, and shareholder activism is lacklustre. “There is virtually no voting by poll at AGMs”, ACGA notes, “and meetings are often held in remote locations.”
The government has introduced a new companies bill, which would allow shareholders to pursue class-action lawsuits, but it will probably lapse when elections are called some time before May. Even if a new government passes the legislation, India’s cumbersome courts tend to delay justice to the point of denying it.
New laws may matter less than the spirit that animates them. Satyam’s independent directors, for example, met the standards set by the NYSE. But they did not ask hard questions. Directors in India may sit on as many as 15 boards, which leaves them little time to do their job properly.
But even an assertive board and reputed auditors will struggle to stop managers who are determined to hide their dirty laundry from view. About half of the 30 companies in the Sensex, India’s benchmark stockmarket index, are run by business families, most of who trace their roots back to the closed economy of India’s past. “They don’t always understand the new rules,” says Ms Gopinath. “Until investors stand up and say these practices are unacceptable, what reason do companies have to change?”
Thursday, January 1, 2009
Shopped out
ECONOMIST:IN THE city centre, Poundland is heaving with post-Christmas bargain hunters snapping up everything from underwear to shampoo, some of it for even less than the promised £1 ($1.46). Elsewhere in Leeds brightly coloured sale signs fill shop windows as varied as Ann Summers, a racy lingerie chain, and Harvey Nichols, a pricey department store.
For most on the high street, it has been a grim few months, and Leeds is no exception. Next door to Poundland, the Officers Club, a men’s fashion chain which recently called in administrators, is selling dinner jackets for less than the price of a night out (£20.80 to be exact) and slashing 60% off much else. Nearby a sports outfitter and greetings-card shop are both holding closing-down sales, with 75% off. A branch of zavvi, a music and video store that has also collapsed, is handling queues 20 people deep at its tills as shoppers rush to snap up discounted £2.99 albums and to spend gift vouchers while they can.
Jonathan de Mello at Experian foresees a radical restructuring of the market as consumer habits change and smaller retailers go to the wall. The winners are likely to be the big shopping centres where people go for an experience which might include a decent meal and also encourages them to shop on impulse as well as for necessities. Shops in high streets without sufficient “footfall”, however, will be among the losers
For most on the high street, it has been a grim few months, and Leeds is no exception. Next door to Poundland, the Officers Club, a men’s fashion chain which recently called in administrators, is selling dinner jackets for less than the price of a night out (£20.80 to be exact) and slashing 60% off much else. Nearby a sports outfitter and greetings-card shop are both holding closing-down sales, with 75% off. A branch of zavvi, a music and video store that has also collapsed, is handling queues 20 people deep at its tills as shoppers rush to snap up discounted £2.99 albums and to spend gift vouchers while they can.
Jonathan de Mello at Experian foresees a radical restructuring of the market as consumer habits change and smaller retailers go to the wall. The winners are likely to be the big shopping centres where people go for an experience which might include a decent meal and also encourages them to shop on impulse as well as for necessities. Shops in high streets without sufficient “footfall”, however, will be among the losers
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