China Pre-U
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Winners and losers in the great Chinese rebalancing

Winners and losers in the great Chinese rebalancing | China Pre-U | Scoop.it
NEAR the centre of Sumatra, an Indonesian island once blanketed by forest, a gash in the ground reveals the wealth that lies just beneath its surface. Large yellow...
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Andrew Watson's comment, September 28, 2014 7:57 AM
For decades, China’s blistering growth has depended on exports and investment. The country has been the world’s cheap labour workshop but now looks for a more prosperous future. China has already lifted millions out of poverty within its own borders by investment and millions more outside it, with countries benefitting from China’s exponential growth. For the first time since the Opium Wars and decline of the Qing dynasty, China has returned to a position of global power and influence. This growth however is unsustainable; shown by their capital-intensive, export-oriented approach delivering diminishing returns. The financial crash of 2008/9 provided clear evidence that China’s export-driven economy is vulnerable to dips in demand in the rest of the world. Meanwhile, its dependence on investment has introduced distortions and imbalances into the Chinese economy. These distortions can be seen in the example of China’s solar-panel industry. This industry is an excellent example because it demonstrates massive state investment and production outstripping demand. The massively over-producing solar industry meant that the Wuxi subsidiary of Suntech Power defaulted on a $500 million bond payment due to insufficient demand, declaring technical bankruptcy. However the effects are not only being felt within China. As mentioned in the article, countries exporting to China are experiencing significant drops in prices as a result of decreased consumption. In the short run this is of a negative impact with potential spikes in unemployment, in the long run however, the reduction in prices may spark interest in these commodities from other manufacturing countries when previously the market price was too high due to China’ demand.
The key point to consider however, is the assessment of why a consumer-spending-based economy is so great in the first place, especially one fuelled by debt? Admittedly Chinese growth is not only economically unsustainable but also environmentally unsustainable, but an increase in household debt and an excessive decrease in the savings ratio can have consequences of their own.
Tom Rees's comment, September 28, 2014 5:08 PM
I think one of the main things to take from this article is the abundance and scale of ramifications that affect economies across the globe, as a result of China’s every movement. Such a large economy and demographic has such a profound influence on other countries, that whether its growth rate is increasing or shrinking, there will undoubtedly be ‘winners and losers, regardless of whether the changes are a result of government policy or just a more natural shift in the economy. Consequently, it is unsurprising that the Chinese decrease in growth rate of 2.5% points (a decrease greater than the amount the US economy grows by each year – will have dramatic effects for other economies, especially those more local Asian economies who operate on symbiotic trade relationships with China.
Since China contributes 15.4% of total global GDP at PPP in 2013, it is natural that a rebalancing of the economy will have dramatic consequences. However, the article gives interesting individual examples of these consequences in action, for example the near 50% fall in Indonesian coal prices since 2011. It will be interesting to see how the consequences increase and multiply, as China continues to move further away from export and investment driven growth towards a more consumption based economy.
Archie Supple's comment, September 28, 2014 5:52 PM
This article clearly shows that the rebalancing in China though seen as beneficial for the chinese economy as a whole so it becomes less dependant on investment, some of chinas current trading partners will lose out while others gain as demand for goods changes. China's economy has started to slow from 10% over the past decade down to 7.5% for this year. This slow down has caused a decrease in the demand for imported raw materials and capital goods, this has greatly affected countries such as Australia. 30% of Australian exports are to china with a great deal of this made up of raw materials particularly coal. Mining made up 8% of its GDP, and withs chinas huge $400 billion of investment during the financial crisis they felt very little effects from the global recession due to the surge in demand driving their mining boom. But this boom has started to end as chinese demand for raw materials decreases as rebalancing of the economy is encouraged, through attempts to boost consumption. This has seen unemployment rise to 6% in Australia and mining fall to only 3% of GDP. Though Chinas demand for coal is still the largest in the world, India has the third highest and its demand is expected to rise 7% a year for the next decade and double by 2035. So even though China has reduced the opportunities for Australia others are around the world which can be exploited. For other countries though this rebalancing can be seen as a huge opportunity. As real incomes rise, Chinas middle class is predicted to boost by around 500million people. This should see a rise in higher value added imported goods demand rise. The UK has seen exports to china boost by 14% this year and 40% of this has been made up of vehicles and transport goods due to huge rises in demand for luxury British made cars. Rolls Royce now has 28% of all global sales in China. So as the rebalancing continues many nations which have ridden on the back of Chinas growth by supplying the raw materials and capital goods for the industrial growth may see adverse affects as this demand falls. But a new market is emerging for other countries producing goods which satisfy the demand for the growing number of consumers.
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Beware a Chinese slowdown

Beware a Chinese slowdown | China Pre-U | Scoop.it
Kenneth Rogoff: China’s growth rate remains perched at a very high level, so there is a great deal of room to fall
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When cheap is not so cheap

When cheap is not so cheap | China Pre-U | Scoop.it
WHERE managers should locate a new factory depends on many things. Cost is one of them. But costs come in many forms and change constantly. Alongside labour costs,...
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China poised to pass US as world’s leading economic power this year - FT.com

China poised to pass US as world’s leading economic power this year - FT.com | China Pre-U | Scoop.it
The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind China this year, sooner than widely anticipated, according to the world’s leading statistical agencies. The US has been the global leader since
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China allows wider currency fluctuation

China allows wider currency fluctuation | China Pre-U | Scoop.it
China took a major step toward making the yuan a freer currency by further loosening its daily trading limits, indicating the leadership's belief that the country's economic growth, though slowing, is strong enough for exchange-rate reforms to move forward.
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Investors shaken as renminbi’s reputation as ‘one-way bet’ sours - FT.com

Investors shaken as renminbi’s reputation as ‘one-way bet’ sours - FT.com | China Pre-U | Scoop.it
Last week the renminbi did something it has not done for years – it shocked the market. During the final three trading sessions of the week, the Chinese currency dropped as much as 1.3 per cent against the US dollar, marking its biggest three-day
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China’s Bright Food eyes Europe acquisitions - FT.com

China’s Bright Food eyes Europe acquisitions - FT.com | China Pre-U | Scoop.it
China’s Bright Food is on the acquisition trail in Europe, visiting London, Dublin, Brussels and Barcelona, as part of the state-controlled group’s drive to double its international presence within the next three years. Ge Junjie, vice-president of
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China Savers’ Penchant for Property Magnifies Bust Danger

China Savers’ Penchant for Property Magnifies Bust Danger | China Pre-U | Scoop.it
Chinese households’ concentration of wealth in real estate is magnifying the danger to the world’s second-largest economy of any property bust, as the nation grapples with the consequences of its record credit surge.
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China: Delta blues - FT.com

China: Delta blues - FT.com | China Pre-U | Scoop.it
Home town specialities Gerhard Flatz, the general manager of an Austrian factory in China that makes high-end skiwear for European brands, has a problem. He cannot find enough skilled seamstresses even though top performers can earn $1,500 a month,
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China loses its allure

China loses its allure | China Pre-U | Scoop.it
ACCORDING to the late Roberto Goizueta, a former boss of The Coca-Cola Company, April 15th 1981 was “one of the most important days…in the history of the...
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China's 2013 economic growth dodges 14-year low but further slowing seen

China's 2013 economic growth dodges 14-year low but further slowing seen | China Pre-U | Scoop.it
BEIJING (Reuters) - China's economy narrowly missed expectations for growth to hit 14-year lows in 2013, though some economists say a cooldown will be inevitable this year as officials and investors hunker...
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Can Walmart survive China's slowdown? - BBC News

Can Walmart survive China's slowdown? - BBC News | China Pre-U | Scoop.it
How is China's slowing economy affecting Walmart's plans in Asia?
Mo Tanweer's insight:

China's slowdown and Walmart thoughts on it.

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China’s property conundrum

China’s property conundrum | China Pre-U | Scoop.it
The various steps that China is taking to stem house price rises seems to be working, but can the government manage an orderly slowdown in the property sector?
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Business Newswires : euronews : the latest international news as video on demand

Business Newswires : euronews : the latest international news as video on demand | China Pre-U | Scoop.it
Business Newswires | euronews : International and European news all available as video on demand
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China speeds past Europe on 4G mobile rollout - FT.com

China speeds past Europe on 4G mobile rollout - FT.com | China Pre-U | Scoop.it
China has overtaken Europe by building hundreds of thousands of masts to carry superfast 4G mobile signals and Western executives warn it will pull further ahead with its plans to more than double construction this year. While the take-up of 4G
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Presenting China's Largest Shadow Bank | Zero Hedge

Presenting China's Largest Shadow Bank | Zero Hedge | China Pre-U | Scoop.it
Shadow banks in China come in a variety of forms and guises. The term is applied to everything from trust companies and wealth management products to pawnshops and underground lenders. What surprising is that China’s biggest shadow bank is actually a creation of the central government and receives billions in financing directly from the banks.  Even more interesting, this shadow bank recently pulled off a successful international IPO where it raised billions of dollars...
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China v the US: how the superpowers compare

China v the US: how the superpowers compare | China Pre-U | Scoop.it
As Barack Obama prepares for the 'no-necktie summit' with the Chinese leader Xi Jinping in California, we decided to look at the two superpowers and compare data such as health, wealth and environmental development – an inherently tricky task given the countries' markedly different systems. Can it be done? Join the debate here
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China: Delta blues - FT.com

China: Delta blues - FT.com | China Pre-U | Scoop.it
Home town specialities Gerhard Flatz, the general manager of an Austrian factory in China that makes high-end skiwear for European brands, has a problem.
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China gives local governments go-ahead to roll over debt - FT.com

China gives local governments go-ahead to roll over debt - FT.com | China Pre-U | Scoop.it
Faced with a mountain of maturing loans this year, China has given local governments the go-ahead to issue bonds as a way of rolling over their debt to avoid defaults.
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