Chinese Economics Thread
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Hendrik_2000
Lieutenant General
You probably mixed up Trade with export. Before the crisis hit Chinese trade make up about 40 to 55 % of GDP import and export are roughly balance. So export never been higher than 30% at most. Now even less
Here is the stats of GDP growth
Before revision
2005: 10.4%
2006: 11.6%
2007: 13%
2008: 9.6%
2009: 8.7%
Revised
2005: 11.3%
2006: 12.7%
2007: 14.2%
2008: Untouched
2009: 9.1%
2010: Projected growth 9-10%
They hardly missed a beat. PIIGS countries will be dancing on the street if they can even get 3% growth.
@ spartan I won't call a year drop in growth as proof that Asia is dependent on the EU and US . The finance sytem in Asia is now more robust than pre 1997. Ironically by following IMF Recipe and let the bad bank collapsed no bailout. Contrary what they do now in the west keeping the Zombies alive
On different subject
Japan sows seeds for Chinese growth
By Jonathan Soble in Tokyo
Published: July 7 2010 02:56 | Last updated: July 7 2010 02:56
Buy a take-out chicken dinner in Los Angeles or an onigiri rice ball from a convenience store in Tokyo, and there is a good chance the plastic bag it comes in will have been made in China.
Just as likely, the bag’s journey to the checkout counter from its birthplace in a Middle Eastern oil patch will have been shepherded by a Japanese trading company, Mitsubishi.
is an example of how China is playing a more central role in the operations of some of Japan’s biggest companies, the sogo shosha, or general trading companies.
Shosha such as Mitsubishi, Mitsui, Sumitomo and Marubeni have been among the biggest beneficiaries of China’s rise. Having built their businesses supplying resource-poor Japan with raw materials, in the 1990s they switched from simple fee-based trading to investing, taking stakes in everything from Siberian gas fields to Australian iron ore mines.
New ambassador’s trading background shows that Japan means business
Few people know more about the role of Japanese trading groups in deepening business ties with China than Uichiro Niwa, Japan’s new ambassador to Beijing, report Mure Dickie and Jonathan Soble.
Mr Niwa is a former president and chairman of trading house Itochu and helped spearhead its Chinese expansion throughout the 1990s and early years of this century.
His appointment as the first non-career diplomat to head the Beijing embassy since Japan established diplomatic ties with communist China in 1972 is part of a drive by the ruling Democratic party to reduce the influence of Japan’s elite bureaucrats.
Katsuya Okada, foreign minister in the DPJ-led government, says Mr Niwa will bring a wealth of talent and experience to what is a vital role in managing the often testy relationship between East Asia’s two leading powers.
In a blog posting on the surprise appointment last month, Mr Okada noted in particular the outspoken former executive’s willingness to “swing the axe” to drive through a drastic reorganisation at Itochu when it fell into crisis in 1999.
“I've known Mr Niwa for a long time and he is an extremely fine person,” wrote Mr Okada, who is the son of the founder of Japanese retail group Aeon, which itself has substantial operations in China.
However, the unprecedented appointment of a businessman to such an important Japanese diplomatic position has dismayed many foreign ministry officials, while winning little praise from the private sector.
Hiromasa Yonekura, chairman of the Keidanren, Japan’s most influential business lobby, worries that it might be “very difficult” for former executives to fully grasp security issues and to create the political networks vital to ambassadorial success.
The lack of enthusiasm for Mr Niwa’s diplomatic debut reflects in part his image among trading house counterparts as something of a lone wolf.
“He’s not very popular in the industry,” says one manager at a rival trading house.
“He's seen as someone who wants to draw attention to himself.”
The timing was perfect. When roaring Chinese demand lifted commodities prices a few years later, the shosha booked windfall profits.
Their traditional import-export businesses flourished too. Shosha brokered sales of Japanese capital goods to China – from factory equipment to power plants to bullet trains – and arranged imports of Chinese processed food and clothing to Japan.
“China is the only country that we dedicate a separate office to managing. That shows you how important it is to our business,” says Shohei Hino of Mitsubishi’s China unit.
Today the shosha are looking at new ways to take advantage of China’s growth by increasing their direct investments in the country.
The enterprises that are taking shape as a result are often more “foreign” and complex than anything they have tried before – taking the companies well beyond their roots in Japan.
Take the plastic bags. Mitsubishi exports polyethylene sheets to China from Sharq, a Saudi Arabian petrochemical company in which it owns a minority stake.
Once in China, the sheets are turned into bags by a Mitsubishi-affiliated manufacturing company, before being shipped to KFC chicken outlets and Lawson convenience stores – also part-owned by Mitsubishi – in the US and Japan.
Another big Japanese trading group, Itochu, has been an active investor in China’s domestic food market.
In 2008 it paid $710m for a 20 per cent stake in Ting Hsin, a big food processing group. That followed a deal with Cofco, China’s state-owned food processor, to buy grain and other agricultural commodities in global markets, an effort to build pricing power and combat rising food costs.
Other traders are also targeting Chinese stomachs. Last year Marubeni agreed a soyabean-procurement deal with Sinograin, a state-owned grain importer, and has invested in a bakery in Shanghai that makes bread using Marubeni-sourced wheat. It has moved into China’s nascent wine industry as a co-investor with Asahi, the Japanese brewer, in a winery in Nantong.
Marubeni is also investing in water, taking a 40 per cent stake in a purification plant in Chengdu, Sichuan Province, that is majority-owned by Veolia of France.
Some of the shosha’s most intriguing moves have involved brokering trade between China and third countries. Mitsubishi, for example, has sold Chinese-built cement-making equipment to Vietnam, and sees future opportunities in marketing Chinese-made railway cars to India and other developing countries.
“China doesn’t have experience selling its own products overseas, so Mitsubishi’s job would be to find customers,” says Mr Hino of Mitsubishi.
One risk to the strategy is that as Chinese companies grow and gain more international experience, they will see less need to piggyback on the shosha.
That has already happened with manufacturers in Japan, and is one reason the shosha were forced to shift away from trading to investment.
Another obstacle is lingering resentment of Japan’s wartime occupation of China, which some trading company managers worry might surface if they seek majority control of their Chinese ventures.
“Can you imagine a Japanese-controlled utility raising water rates in China?” asks one. “There’s no way we would even try.”
This is the third in a series on Japan’s business relations with China
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Spartan95
Junior Member
When/where did I say that ASEAN was dependent on EU/US?
I said ASEAN was affected by the global financial crisis. There is a difference between the 2.
The same cannot be said of Indonesia, which staged a massive bank bailout that has now developed into a political scandal rocking the current adminstration of President Bambang Susilo Yudoyono.
Hendrik_2000
Lieutenant General
One year is no indication that financial crisis affected Asia temporary set back maybe.
Technically it is not bail out. What Indonesia did, is nationalized the larger banks and let the smaller banks go belly up, causing gut wrenching riot and bring untold misery.
The banks have to hand over their share to the goverment in return for help.
So the goverment own the bank and restructured it( fire sale their asset, recapitalize) and in same case forced merged with healthier bank. Same are sold
Bail out mean the bank still in control. They are not obligated to do anything. They keep the share and depreciated asset. While the tax buyer are holding the bag. Instead of using the capital to lend, the bank use goverment hand out to recapitalized their busted asset.
Companies brace for end of cheap made-in-China era
Costlier labor, currency are ending cheap made-in-China era; manufacturers struggle to adapt
Elaine Kurtenbach, AP Business Writer, On Thursday July 8, 2010, 12:57 pm EDT
SHANGHAI (AP) -- Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor.
A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.
Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.
"China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.
"I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.
In an about-face mocked on "The Daily Show with Jon Stewart," Wham-O, the company that created the Hula-Hoop and Slip 'n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.
At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.
"Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper," said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.
That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S.
"If costs go up by half, it's about the same price as in the U.S. And you don't have 30 days on the water in shipping," he says.
Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking.
Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. Land, water, energy and shipping costs are on the rise.
In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania.
Mexico, in particular, has gained an edge thanks to the North American Free Trade Agreement and fast, inexpensive trucking, says Mike Romeri, an executive with Emptoris, the consulting firm.
Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China.
So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.
That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages.
Foxconn refused repeated requests for comment on plans to move much of its manufacturing capacity to central China's impoverished Henan province, where a local government website has advertised for tens of thousands of workers on its behalf.
But among other projects farther inland, Foxconn is teaming up with some of the biggest global computer makers to build what may be the world's largest laptop production hub in Chongqing, a western China city of 32 million where labor costs are estimated to be 20 to 40 percent lower than in coastal cities.
Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy.
But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative.
"The new game is to find a way to do the domestic market," says Goodwin.
Many factories in Foshan, another city in Guangdong that saw strikes at auto parts plants supplying Japan's Honda, have left in the past few months, mostly moving inland to Henan, Hunan and Jiangxi, said Lin Liyuan, dean at the privately run Institute of Territorial Economics in Guangzhou.
Massive investments in roads, railways and other infrastructure are reducing the isolation of the inland cities, part of a decade-old "Develop the West" strategy aimed at shrinking the huge, politically volatile gap in wealth between city dwellers and the country's 600 million farmers.
Gambling that the unrest will not spill over from foreign-owned factories, China's leaders are using the chance to push investment in regions that have lagged the country's industrial boom.
They have little choice. Many of today's factory workers have higher ambitions than their parents, who generally saved their earnings from assembling toys and television sets for retirement in their rural hometowns. They are also choosier about wages and working conditions. "The conflicts are challenging the current set-up of low-wage, low-tech manufacturing, and may catalyze the transformation of China's industrial sector," said Yu Hai, a sociology professor at Shanghai's Fudan University.
Associated Press researcher Ji Chen contributed to this report.
Technically it is not bail out. What Indonesia did, is nationalized the larger banks and let the smaller banks go belly up, causing gut wrenching riot and bring untold misery.
The banks have to hand over their share to the goverment in return for help.
So the goverment own the bank and restructured it( fire sale their asset, recapitalize) and in same case forced merged with healthier bank. Same are sold
Bail out mean the bank still in control. They are not obligated to do anything. They keep the share and depreciated asset. While the tax buyer are holding the bag. Instead of using the capital to lend, the bank use goverment hand out to recapitalized their busted asset.
Companies brace for end of cheap made-in-China era
Costlier labor, currency are ending cheap made-in-China era; manufacturers struggle to adapt
Elaine Kurtenbach, AP Business Writer, On Thursday July 8, 2010, 12:57 pm EDT
SHANGHAI (AP) -- Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor.
A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.
Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.
"China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.
"I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.
In an about-face mocked on "The Daily Show with Jon Stewart," Wham-O, the company that created the Hula-Hoop and Slip 'n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.
At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.
"Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper," said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.
That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S.
"If costs go up by half, it's about the same price as in the U.S. And you don't have 30 days on the water in shipping," he says.
Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking.
Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. Land, water, energy and shipping costs are on the rise.
In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania.
Mexico, in particular, has gained an edge thanks to the North American Free Trade Agreement and fast, inexpensive trucking, says Mike Romeri, an executive with Emptoris, the consulting firm.
Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China.
So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.
That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages.
Foxconn refused repeated requests for comment on plans to move much of its manufacturing capacity to central China's impoverished Henan province, where a local government website has advertised for tens of thousands of workers on its behalf.
But among other projects farther inland, Foxconn is teaming up with some of the biggest global computer makers to build what may be the world's largest laptop production hub in Chongqing, a western China city of 32 million where labor costs are estimated to be 20 to 40 percent lower than in coastal cities.
Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy.
But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative.
"The new game is to find a way to do the domestic market," says Goodwin.
Many factories in Foshan, another city in Guangdong that saw strikes at auto parts plants supplying Japan's Honda, have left in the past few months, mostly moving inland to Henan, Hunan and Jiangxi, said Lin Liyuan, dean at the privately run Institute of Territorial Economics in Guangzhou.
Massive investments in roads, railways and other infrastructure are reducing the isolation of the inland cities, part of a decade-old "Develop the West" strategy aimed at shrinking the huge, politically volatile gap in wealth between city dwellers and the country's 600 million farmers.
Gambling that the unrest will not spill over from foreign-owned factories, China's leaders are using the chance to push investment in regions that have lagged the country's industrial boom.
They have little choice. Many of today's factory workers have higher ambitions than their parents, who generally saved their earnings from assembling toys and television sets for retirement in their rural hometowns. They are also choosier about wages and working conditions. "The conflicts are challenging the current set-up of low-wage, low-tech manufacturing, and may catalyze the transformation of China's industrial sector," said Yu Hai, a sociology professor at Shanghai's Fudan University.
Associated Press researcher Ji Chen contributed to this report.
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Spartan95
Junior Member
Are you saying that temporary setback (1 year's worth of negative economic growth) is not an indication that ASEAN was affected by the global financial crisis?
If that is the case, you can also say that ASEAN was not affected by the Asian financial crisis of 97 because it was also a "temporary setback" (lasted ¬1 year as well). And, by extension, if ASEAN was not affected by the Asian financial crisis of 97, than there is shouldn't have been a crisis at all.
Are you saying there wasn't a bailout of Bank Century by the Indonesian government?
Back on topic. ECFA is at the centre of a brawl in Taiwan's parliament:
Some of the more sensational news reported bite and scratch marks on the members of parliaments involved in the brawl.
Spartan95
Junior Member
EU is an formal economic and political entity that uses a common currency and has a EU President and Parliament.
Asia is a continent without a common currency and is not a single, formal economic entity.
Not quite the same thing.
A more appropriate comparison will be between China's trade volume with Europe (not EU) and Asia (both being continents). There is a difference because there are European countries who are not part of EU, such as Turkey, Norway and some of the Balkan states.
Well, CAFTA has already lowered the trade barriers between China's ~1.3 billion people with ASEAN's ~500 million people. That creates a massive market of ~1.8 billion (the world's largest Free Trade Area at the moment).
If India's ~1,2 billion is added in, that makes it a market of ~3 billion (or more than half of the planet's population).
Japan's 120+ million and RoK's ~48 million will make it all the more impressive, forming a Free Trade Area encompassing some of the most populous countries (China, India & Indonesia) and some of the largest economies (China, Japan) on Earth.
Hendrik_2000
Lieutenant General
I am talking about Financial crisis in 97 I don't know anything about century bank bail out in 2008. What I know is that leftover from the old conglomerate was hurt by recent changes to the strengthened tax colection initiated by Sri Mulyani. so they are out to get her. And they did succeed.She is now the vice director of world bank showing that the world bank trust her integrity, She is one of the most capable and honest finance minister that Indonesia ever had.She made too many enemies
Century bank is just an excuse to get her
Now how can you explain that Asia growth resumed while the west is still mired in recession . Yes I say Asia is not affected in the long run! 97. Financial crisis is more than just 1 year
Indonesia Loses Its Stellar Reformer
Tag it:Written by Our Correspondent
Wednesday, 05 May 2010
Photo: Jakarta GlobeWhat happens after Finance Minister Sri Mulyani Indrawati leaves government?
Indonesian stocks fell sharply, the rupiah weakened and bond yields rose Wednesday on the news that Finance Minister Sri Mulyani Indrawati,the most important reformer in the government of President Susilo Bambang Yudhoyono, is leaving to become one of three managing directors of the World Bank.
An official with the International Monetary F+und prior to joining Yudhoyono's government, Sri Mulyani was a principal architect of reformasi, Yudhoyono's stuttering campaign to clean up corruption in a country making its slow but tortured way up the rankings of Transparency International's global corruption perceptions index. Indonesia is now ranked 111th of 180 countries.
Among other measures, she closed Indonesia's notoriously corrupt customs agency, a major impediment to companies importing and exporting through the country's ports. She fired dishonest officials and raised bureaucrats' salaries in an attempt to clean up corrupt practices. Just this week, she announced that she would attempt to clean out the Directory of Taxation after widespread publicity over bribes to tax officials. In early April, a fleeing tax official named Gayus Tambunan was persuaded to return from Singapore after he had been identified as having taken millions of dollars in bribes from businessmen seeking to lower their tax burden.
Her decision to leave the government is being interpreted widely as either a victory for anti-corruption forces or a desire to leave after she got fed up with months of controversy over the bailout of the mid-sized Bank Century in the midst of the global financial crisis.
Much depends on who will replace her. Hatta Rajasa, the Coordinating Minister for Economic Affairs, was named to take the portfolio temporarily. Rajasa, formerly Yudhoyono's State Secretary and an ally of the president, is not an economist and, as a politician, is regarded is more likely to weigh political considerations rather than economic ones in stearing the economy. Anggito Abimanyu, the head of the finance ministry's Fiscal Policy Agency, Chatib Basri, an academic and special adviser to the finance minister, Raden Pardede, an economist and former head of the state asset management company, and Agus Martowardojo, president director of Indonesia's largest lender Bank Mandiri, were named by Reuters as possible successors.
It is questionable, however, whether any of the candidates would have the determination that characterized Sr Mulyani's operations. In addition, the country is still without a Central Bank governor since the time when Boediono left to become Yudhoyono's vice president in mid 2009 prior to the national election. Darmin Nasution, the senior deputy governor, has been acting governor.
Sri Mulyani made a particular enemy of Aburizal Bakrie, the powerful head of the Bakrie group of companies and head of the Golkar Party, for vetoing a bailout for Bakrie's distressed companies during the 2008 global financial crisis and for carrying on a sustained campaign to force Bakrie's companies to pay back taxes. It remains to be seen if her departure represents a victory for Bakrie in particular.
Putting the best face on it, the departure is being cast as a vote of confidence by the World Bank in Sri Mulyani's integrity after the months-long controversy that ended on March 3 over the 2008 Bank Century bailout. With the bank threatened with an outright collapse that could have endangered the country's financial system, the finance secretary and Vice President Boediono, then the chief of Indonesia's central bank, poured US$700 million into its coffers in the attempt to save it. Several bank officials fled the country with several hundred millions of dollars in funds from the looted bank. The officials said the crimes that occurred had nothing to do with the bailout.
The charges of corruption against the two officials were widely regarded as a specious attempt to get rid of them. Bakrie, who critics say saw in the investigation a chance to drive Sri Mulyani out of the government, has lately muted his opposition to the finance minister. Despite the fact that Golkar was a major part of Yudhoyono's coalition, Golkar led the fight in the special investigative committee investigating the activities surrounding the bailout. The probe finally sputtered out after months of grandstanding by lawmakers opposed to the two although on Monday several opposition members walked out of the chamber when the Finance Minister arrived to present the annual budget -- which passed nonetheless.
One of Indonesia's richest men, Bakrie is also said to nurse ambitions to succeed Yudhoyono when the country's president completes his current five-year term in 2014. Sources in Jakarta told Asia Sentinel that Bakrie has been drawing closer to Yudhoyono over recent weeks. Whether that is because they are becoming more closely allied or because Bakrie had given up his campaign against her is unclear, the sources say. They point to the fact that in early April, Yudhoyono made a well-publicized trip to look over the site of Indonesia's worse manmade environmental disaster in history.
That is a mud volcano that blew out at the East Java site of a gas well being drilled by PT Lapindo Brantas, a Bakrie company. Since May of 2006, the stinking mud has inundated tens of thousands of homes and is expected to continue to flow for as long as the next 30 years. Although the Bakrie companies have assumed some responsibility to compensate homeowners, the government has absolved Bakrie from blame for the disaster. Some political observers saw in Yudhoyono's trip a warning to Bakrie to pull in his horns over Sri Mulyani. Immediately after the visit, the East Java Police Chief announced that the investigation into the causes of the blowout could be reopened if there was new evidence.
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Hendrik_2000
Lieutenant General
Not too long ago G. Chang predicted that Chinese bank will collapse
Well, well not only did Chinese bank survive, they are prospering . They are the top of the ranking.
China's banks
Great Wall Street
The rise of China’s state-backed banks is stunning. But success will force the model to change
Jul 8th 2010
THERE is no more potent symbol of the relative decline of Western finance than the revolution in Chinese banking over the past decade. While American and European banks have been busy blowing up, China’s have been transformed from communist bureaucracies crippled by bad debts into something resembling world beaters.
That metamorphosis has been completed by the flotation of Agricultural Bank of China, the last of the five big state-owned banks to list (see article). Even by Chinese standards it is colossal, with 320m customers, 441,000 staff and more branches than many Wall Street firms have desks. Four of the world’s ten biggest banks by market value are now Chinese. In 2004 none was. Better-known (and more global) lenders such as Deutsche Bank and Barclays look rather puny by comparison. It’s natural to wonder if more than just firms are being eclipsed: whether a freewheeling era is being superseded by a “Beijing consensus” of state-managed finance. Though neat, such a conclusion looks wrongheaded.
Whatever their colour, these cats catch mice
Related items
Agricultural Bank's IPO: Agricultural revolution
Jul 8th 2010As all bankers know, league tables can mislead. Still, China’s rise is more solid than that of Japan’s banks in the 1980s. Finance has huge potential in China—less than 1% of AgBank’s retail customers have mortgages. And the country’s banks had a good crisis, largely because they never entirely left the government’s embrace. So although they make money and have the trappings of public companies, the state owns a majority stake and the Communist Party appoints the top brass, whose pay is a fraction of that of their Western peers. Those bosses, with their dual role as party bigwigs and chief executives, are beholden to a higher authority than the stockmarket. Their regulators, meanwhile, wield supposedly crude tools to control banks, such as lending caps and reserve ratios, long dismissed by “light touch” supervisors elsewhere. And the system is pretty closed. Some foreign banks have minority stakes in Chinese firms. But foreigners’ own operations on the mainland have a market share of less than 1% by profits, while Chinese banks make less than 4% of their profits abroad.
This patriotic model has done well. Rich countries tried to kick-start their economies by getting central banks to lend to banks, which, frustratingly, have hoarded the liquidity. As in 1999 after the Asian crisis, China’s politicians just cut out the middleman and told the banks to supply more credit. Loans grew spectacularly, from 102% of GDP in 2008 to 127% in 2009, funding everything from motorways through paddy fields to yuppie flats in Pudong. Growth stayed strong and China won many admirers. In India and Brazil it is no longer retrograde to argue that state-controlled banks should help counteract the economic cycle. Even in rich countries with privately owned banks, supervisors are eyeing the tools used by China’s regulators to control credit. Communist Party diktat has been relabelled as “macroprudential supervision”.
Even admirers, though, cannot fail to spot China’s bad-debt problem. Those who think capitalist democracies have an unrivalled talent for generating dud loans should consider the Middle Kingdom. After decades of mismanagement, by the late 1990s perhaps a third of all loans were sour, most of them owed by zombie state-owned enterprises. Cleaning that up left China a world leader in bail-outs. Since 1998 it has injected the equivalent of $420 billion into the biggest five banks alone, more than the outlays of America’s TARP bail-out fund. China’s reforms were meant to stop this ever happening again.
A repeat performance is exactly what some fear after the latest binge. Most worrying are loans to infrastructure projects sponsored by local governments (perhaps a sixth of outstanding loans) and, given a frothy property market, real-estate financing and mortgages (a fifth of the total, with some overlap with infrastructure loans). China’s bankers say they are relaxed but some investors are kept awake by visions of corrupt officials, roads to nowhere and deserted shopping malls.
Although potentially severe, these bad debts will not be the downfall of the Beijing model of banking. Even if a chunk of the loans is written off, the system can absorb the hit. That is partly thanks to an impressive regulator, which has prodded the banks to raise capital this year—by about an eighth, if all goes to plan. But it is mainly because of China’s high savings rate. With piles of excess deposits banks do not rely on fickle debt markets for funding. That buys them time to earn their way out of a bad-debt problem, using their high lending profits to replenish capital. As a backstop, China’s government, with little debt and large foreign reserves, has deep pockets.
Capitalism with fewer Chinese characteristics
Indeed, there is only one thing that will guarantee the demise of China’s present model of banking: success. If China manages to digest its recent lending boom without a slump and then rebalance its economy away from investment and towards consumption, banks will need to free up space on their balance-sheets for lending to individuals and small firms. The heavy lifting of financing infrastructure and state companies will shift to bond markets. As customers have more sources of finance, banks’ lending profits will be squeezed, forcing them to diversify into capital-market activities like underwriting. Banks’ buffers of deposits should also shrink, relative to loans, as the savings rate falls and as people move cash into higher-return shares and bonds (earning banks fees in the process).
China’s banks could then end up looking a lot like banks elsewhere, although the state will still have control. Yet even that could change gradually. At current growth rates China’s banks will need capital injections every few years. The government may tire of these shakedowns—its participation in this year’s equity raisings has been a little grudging—and allow its stake to be diluted instead. And, as China’s banks claim their rightful place among the global leaders, they will find doing big foreign deals is hard when the government has a hand on the steering wheel. The rise of China’s banks is stunning and a little frightening. Yet they are not the pallbearers of market-based finance, just a work in progress.
Leaders
Well, well not only did Chinese bank survive, they are prospering . They are the top of the ranking.
China's banks
Great Wall Street
The rise of China’s state-backed banks is stunning. But success will force the model to change
Jul 8th 2010
THERE is no more potent symbol of the relative decline of Western finance than the revolution in Chinese banking over the past decade. While American and European banks have been busy blowing up, China’s have been transformed from communist bureaucracies crippled by bad debts into something resembling world beaters.
That metamorphosis has been completed by the flotation of Agricultural Bank of China, the last of the five big state-owned banks to list (see article). Even by Chinese standards it is colossal, with 320m customers, 441,000 staff and more branches than many Wall Street firms have desks. Four of the world’s ten biggest banks by market value are now Chinese. In 2004 none was. Better-known (and more global) lenders such as Deutsche Bank and Barclays look rather puny by comparison. It’s natural to wonder if more than just firms are being eclipsed: whether a freewheeling era is being superseded by a “Beijing consensus” of state-managed finance. Though neat, such a conclusion looks wrongheaded.
Whatever their colour, these cats catch mice
Related items
Agricultural Bank's IPO: Agricultural revolution
Jul 8th 2010As all bankers know, league tables can mislead. Still, China’s rise is more solid than that of Japan’s banks in the 1980s. Finance has huge potential in China—less than 1% of AgBank’s retail customers have mortgages. And the country’s banks had a good crisis, largely because they never entirely left the government’s embrace. So although they make money and have the trappings of public companies, the state owns a majority stake and the Communist Party appoints the top brass, whose pay is a fraction of that of their Western peers. Those bosses, with their dual role as party bigwigs and chief executives, are beholden to a higher authority than the stockmarket. Their regulators, meanwhile, wield supposedly crude tools to control banks, such as lending caps and reserve ratios, long dismissed by “light touch” supervisors elsewhere. And the system is pretty closed. Some foreign banks have minority stakes in Chinese firms. But foreigners’ own operations on the mainland have a market share of less than 1% by profits, while Chinese banks make less than 4% of their profits abroad.
This patriotic model has done well. Rich countries tried to kick-start their economies by getting central banks to lend to banks, which, frustratingly, have hoarded the liquidity. As in 1999 after the Asian crisis, China’s politicians just cut out the middleman and told the banks to supply more credit. Loans grew spectacularly, from 102% of GDP in 2008 to 127% in 2009, funding everything from motorways through paddy fields to yuppie flats in Pudong. Growth stayed strong and China won many admirers. In India and Brazil it is no longer retrograde to argue that state-controlled banks should help counteract the economic cycle. Even in rich countries with privately owned banks, supervisors are eyeing the tools used by China’s regulators to control credit. Communist Party diktat has been relabelled as “macroprudential supervision”.
Even admirers, though, cannot fail to spot China’s bad-debt problem. Those who think capitalist democracies have an unrivalled talent for generating dud loans should consider the Middle Kingdom. After decades of mismanagement, by the late 1990s perhaps a third of all loans were sour, most of them owed by zombie state-owned enterprises. Cleaning that up left China a world leader in bail-outs. Since 1998 it has injected the equivalent of $420 billion into the biggest five banks alone, more than the outlays of America’s TARP bail-out fund. China’s reforms were meant to stop this ever happening again.
A repeat performance is exactly what some fear after the latest binge. Most worrying are loans to infrastructure projects sponsored by local governments (perhaps a sixth of outstanding loans) and, given a frothy property market, real-estate financing and mortgages (a fifth of the total, with some overlap with infrastructure loans). China’s bankers say they are relaxed but some investors are kept awake by visions of corrupt officials, roads to nowhere and deserted shopping malls.
Although potentially severe, these bad debts will not be the downfall of the Beijing model of banking. Even if a chunk of the loans is written off, the system can absorb the hit. That is partly thanks to an impressive regulator, which has prodded the banks to raise capital this year—by about an eighth, if all goes to plan. But it is mainly because of China’s high savings rate. With piles of excess deposits banks do not rely on fickle debt markets for funding. That buys them time to earn their way out of a bad-debt problem, using their high lending profits to replenish capital. As a backstop, China’s government, with little debt and large foreign reserves, has deep pockets.
Capitalism with fewer Chinese characteristics
Indeed, there is only one thing that will guarantee the demise of China’s present model of banking: success. If China manages to digest its recent lending boom without a slump and then rebalance its economy away from investment and towards consumption, banks will need to free up space on their balance-sheets for lending to individuals and small firms. The heavy lifting of financing infrastructure and state companies will shift to bond markets. As customers have more sources of finance, banks’ lending profits will be squeezed, forcing them to diversify into capital-market activities like underwriting. Banks’ buffers of deposits should also shrink, relative to loans, as the savings rate falls and as people move cash into higher-return shares and bonds (earning banks fees in the process).
China’s banks could then end up looking a lot like banks elsewhere, although the state will still have control. Yet even that could change gradually. At current growth rates China’s banks will need capital injections every few years. The government may tire of these shakedowns—its participation in this year’s equity raisings has been a little grudging—and allow its stake to be diluted instead. And, as China’s banks claim their rightful place among the global leaders, they will find doing big foreign deals is hard when the government has a hand on the steering wheel. The rise of China’s banks is stunning and a little frightening. Yet they are not the pallbearers of market-based finance, just a work in progress.
Leaders
Last edited:
Spartan95
Junior Member
West still in recession?
Let's see, US posted economic growth of 5.6% in last quarter of 2009, and 2.7% in 1st quarter of 2010. How does that qualify as a recession?
For Europe, refer to:
Some specific data:
I highlighted the increase in imports by EU as this is 1 of the factors contributing to China's growth in exports in 2010Q1, which in turn contributed to China's economic growth in the same period.
So, how do you define recession? With US and EU posting 2 consecutive quarters, how is it that they are "still mired in recession"?