China to the US economy - lifeboat or tugboat? (photo: Randal Rayborn)
A number of recent headline stories out of China about joint ventures and acquisitions involving American companies didn’t seem to get much attention in the US media, yet these stories indicate that the current economic recovery will remain jobless for some time. Is China a lifeboat for US firms, or the tugboat pulling the entire wounded US economy back to shore?
The biggest news came out of the automotive industry, where Beijing Automotive announced its intention to acquire all or part of Saab from General Motors which also announced a joint venture with Shanghai Automotive to sell small cars to India. Ford Motor Company also made headlines in China, as Geely Holding Corp. discussed details of its 100% purchase of Volvo from Ford.
As the Big Three automakers try to shed unprofitable divisions and consolidate operations, look for more acquisitions and joint ventures with China. “Saab is attractive for its brand and its technology”, Beijing Auto president Wang Dazong said of the proposed acquisition, adding that a lack of “technology depth” is one of Beijing Auto’s weaknesses. Chinese firms recognize how much technological improvement they can achieve through acquisition, and they have the cash to go shopping now that the marketplace offers them bargain prices.
Healthier US firms have not been idle in the Chinese marketplace, either. IBM signed a range of cooperation agreements with China’s ENN Group, including a joint venture for new energy development. Pharmaceutical giant Pfizer announced plans to set up a new research and development center in Wuhan, Hubei province, in central China with a goal of acquiring less expensive talent to support Pfizer’s global R&D projects. Fast food company Burger King announced that it was opening six more outlets in Beijing. (At the same time, news reports indicate that fast food outlets in many American cities have implemented hiring freezes – an unprecedented situation.)
Observers can be forgiven for wondering if US Government stimulus dollars are simply going straight to Asia to be put to work. Throughout the crisis, American firms seem to have retained their enthusiasm for investments in Asia – particularly China – but inside the United States private sector investment and job growth have ground to a halt. In some ways the jobless recovery was an entirely predictable result of the information technology boom at the beginning of the decade. Many of the new systems and processes implemented during that boom made middle management positions redundant some years ago, it just took a sharp recession to kick off the actual downsizing. Those middle management jobs will not be coming back. Large- and medium-sized companies have learned to run leaner, and in an economic environment filled with political risk they recognize that aside from a small core of highly intelligent and creative “idea people”, employees are now liabilities.
The US Government has picked its favorites, and the Administration’s policies give us insight into what the next couple of years of “recovery” are going to look like: Big Business goes to the government, Medium-sized Business goes to Asia, and Small Business goes under. Those few small businesses wise and determined enough to swim to the China lifeboat have the best chance of surviving the apparent deflationary depression the American economy is headed into.
Marina Bay Sands and the Esplanade (photo: Randal Rayborn)
Official data released on Thursday showed gross domestic product (GDP) expanded 14.2 per cent in the July-September period on a quarter-on-quarter annualised basis following a 21.7 per cent surge in the previous quarter.
“Effectively, the recession in Singapore is over,” Ravi Menon, permanent secretary with the Ministry of Trade and Industry (MTI), said at a media briefing.
“Economies around the world are now turning the corner… Singapore has benefited from these global and regional trends.”
Year-on-year, Singapore’s GDP grew 0.6 per cent in the third quarter compared with a 3.3 per cent contraction in the April-June period, the MTI said in its third-quarter economic survey.
The 0.6 per cent annual growth in the July-September period was the economy’s first positive showing since the third quarter of 2008, when the city-state slid into a recession.
Growth in the third quarter was powered by the key manufacturing sector, which posted expansion of 26.6 per cent on a quarterly basis following a 58.5 per cent surge in the previous quarter, the ministry said.
Other sectors also turned in a positive display including the wholesale and retail industries, which grew 10.8 per cent after a 7.9 per cent increase in the second quarter, it said. Wholesale and retail make up two-thirds of the economy. – read more at ChannelNewsAsia.com…
Planes are seen on the parking apron at Xi'an Xianyang International Airport in Xi'an, capital of northwest Shaanxi province, November 11, 2009. More than 80 flights were delayed and over 10,000 passengers were stranded at the airport, thanks to a heavy snowfall which hit Xi'an on November 11. (Xinhua)
The whiteout left several people dead and caused hundreds of injuries. It also froze traffic in many cities and grounded hundreds of flights.
Tens of thousands of people and vehicles were stuck along 21 expressways in seven provinces. Power supplies were lost in some parts of the country, the China Highway Information Service said on its website yesterday.
The national meteorological watchdog issued an orange alert – the second-highest level – for snowstorms on Wednesday.
Hebei provincial meteorological bureau issued its top alert three times and officials in Shanxi province declared an emergency the same day. Some places in these two provinces experienced the most severe snowfall in history.
The National Disaster Reduction Committee and the Ministry of Civil Affairs jointly declared a third-level emergency plan early yesterday aimed at fighting the snowstorm in the north of the country.
Premier Wen Jiabao visited Shijiazhuang, the capital city of worst-hit Hebei province, yesterday afternoon. He comforted passengers stranded at railway stations and drivers trapped on the highways.
The heavy snow was the reason for at least six deaths and caused upheaval to around 630,000 people in Hebei. The direct economic loss there has reached 400 million yuan ($59 million), according to the provincial civil affairs department. — read more at ChinaDaily.com…
An economic dawn in Singapore? (photo: Randal Rayborn)
But a dramatic recovery is not being seen, as Singapore’s growth depends on the situation in developed countries, he said.
Speaking at a media conference ahead of the Asia-Pacific Economic Cooperation (Apec) Leaders’ Week beginning this Sunday, he noted that recovery in developed countries was due to stimulus packages administered by their governments.
Though the global economy is picking up, these should not be withdrawn suddenly, he said.
“As governments withdraw these stimuli, you (need) to have self-sustaining growth to create prosperity so that you are actually spending what you are creating,” he cautioned.
He also said that Americans need to save more and Asians need to spend more. read more at AsiaOne Business…
Chinese Defense Minister Cao Gangchuan (L, Front) holds a welcoming ceremony for visiting U.S. Secretary of Defense Robert Gates (R, Front) in Beijing, capital of China, Nov. 5, 2007. (Xinhua/Li Tao) (whj/wcy)
The rise of China is hardly a secret, but because it is a complex economic that is constantly evolving, it gets less attention than hot-button issues. Absent a real crisis between the two, the relationship is more about the flow of capital and the nature of global business than it is about heated battles inside the Beltway or on Main Street. And while the rise of China and America’s increased dependency on Chinese loans to fund its deficits certainly generates anxiety, it’s mostly amorphous barring some specific issue to focus it.
How that relationship came to be is the subject of my new book, Superfusion: How China and America Became One Economy and Why the World’s Prosperity Depends On It. While this economic fusion has taken more than two decades to evolve, with the crisis of the past year, it has become both a tighter embrace and one more fraught with tension. It’s to the credit of both governments – for now – that those tensions have not boiled over.
For their part, the Chinese are concerned about the viability of the American economic system and about the long-term value of their more than $1 trillion of investments in American bonds. They are also dependent on the market even a recession-mired America offers, with exports to the United States still near $300 billion a year. Americans are worried about the effect of lower-cost Chinese labor on U.S. jobs, even though most of the lost jobs were lost long ago and have as much to do with the corrosive effects of technology on labor as they do with cheap production in China. Meanwhile, China offers turbo-charged growth for American companies, as the Chinese government turns to companies like Caterpillar and GE to help with the industrial build-out and as Chinese consumers buy more goods – even a bankrupt GM sold 1.6 million cars in China this year, more than in the United States.
For now, the relationship between the two economies is symbiotic, and is providing a degree of stability to both societies. In the absence of Chinese money, the Obama administration could not be spending its way out of recession, and without American companies operating in China and without Americans purchasing Chinese goods, China wouldn’t have the money to lend and spend. But no country likes to see its sovereignty eroded and its ability to be master of its own fate undermined – and that is precisely what the economic relationship between the China and the United States does to their respective governments. National sentiment in both countries is also strongly suspicious, and that is likely to intensify. read more at RiverTwice Research…
American Mikala Reasbeck smiles at a recruiting office in Beijing, China. (AP Photo/Ng Han Guan)
A week after she started looking, the 23-year-old from Wheeling, West Virginia, had a full-time job teaching English.
“I applied for jobs all over the U.S. There just weren’t any,” said Reasbeck, who speaks no Chinese but had volunteered at the 2008 Beijing Olympics. In China, she said, “the jobs are so easy to find. And there are so many.”
Young foreigners like Reasbeck are coming to China to look for work in its unfamiliar but less bleak economy, driven by the worst job markets in decades in the United States, Europe and some Asian countries. read more…
Creditor banks are expected to oppose JAL's reconstruction plan.
The task force was launched under the authority of Construction and Transport Minister Seiji Maehara.
The draft report includes seeking a debt waiver of about 250 billion yen, a debt-for-equity swap worth tens of billions of yen, and laying off more than 9,000 employees.
Some financial institutions have expressed reservations over the size of the debt waiver, while there is growing unrest among JAL employees toward the stepped-up restructuring measures.
On Tuesday, the task force explained the details of the draft report to JAL and its main creditor banks, including the Development Bank of Japan. As of the end of March, the nation’s flag carrier had about 800 billion yen in interest-bearing debts. With the debt waiver and debt-for-equity swap, the amount of assistance from financial institutions for these debts will total nearly 300 billion yen.
The plan aims to increase the airline’s financial standing, coupled with capital reinforcement through public financial assistance, and also reduce interest payment burdens. read more…
For the European Union, shipments fell 15 per cent in September from a year ago and declined 4.7 per cent to the US, while shipments to China tumbled 15 per cent year-on-year
Non-oil domestic exports fell 7.2 per cent in September from a year earlier to $12.81 billion (US$9.24 billion), trade promotion body International Enterprise Singapore (IE Singapore) said in a statement.
The decline was sharper than the average 6.0 per cent fall forecasted by analysts in a Dow Jones Newswires poll.
Total trade in September shrank 19.0 per cent to $68.28 billion from the same period a year ago.
IE Singapore said the decline in non-oil exports during September was due to weaker shipments of electronic and petrochemical products. read more…
Hong Kong Chief Executive Donald Tsang
He downplayed concerns that China’s promotion of Shanghai as a global trade centre threatened Hong Kong’s traditional role as an international gateway to the Chinese economy, saying the two would work together.
