China: Pre-U Economics
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China: Pre-U Economics
All things Chinese - for Paper 3 of the Pre-U Course
Curated by Graham Watson
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China introduces 10% extra tax on 'super cars' - BBC News

China introduces 10% extra tax on 'super cars' - BBC News | China: Pre-U Economics | Scoop.it
China introduces an additional 10% tax on "super cars", including Ferrari and Rolls-Royce.
Graham Watson's insight:
The Chinese have imposed a tax on 'super cars' - a seemingly random tax on luxury goods. It's difficult to see why the tax has been imposed other than as a political move designed to be seen to be tackling high inequality in the country.

The official reason for the tax is "to guide rational consumption, and promote energy-saving emission reductions, the state Council has approved an additional consumption levy on ultra-luxury cars". Laughable, isn't it. One suspects that political elite will find ways of evading the tax.
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China's property frenzy and surging debt raises red flag for economy

China's property frenzy and surging debt raises red flag for economy | China: Pre-U Economics | Scoop.it
Outstanding loans have risen sharply to 40% of GDP but analysts fear the end of the credit binge could trigger a crisis for the wider world
Graham Watson's insight:
This AFP syndicated piece appears in the Guardian, highlighting two of the ongoing worries regarding the Chinese economy - continued concerns about the property market and the level of debt in the Chinese economy.
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China will not shut the door on globalisation, president Xi Jinping vows

China will not shut the door on globalisation, president Xi Jinping vows | China: Pre-U Economics | Scoop.it

China will not "shut the door" on globalisation, despite Donald Trump's threats to abandon free trade deals and slap tariffs on the world's second largest economy, president Xi Jinping has vowed.

Graham Watson's insight:
Where America turns it back, China fills the void.

One wonders if Americans may come to rue the day?
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China pushes its own Asian trade deal - BBC News

China pushes its own Asian trade deal - BBC News | China: Pre-U Economics | Scoop.it
China pushes its own Asian trade deal at this week's APEC summit, as US seems poised to reject the Trans-Pacific Partnership trade treaty.
Graham Watson's insight:
The demise of the Trans-Pacific Partnership (TPP) has opened the door to the tantalising possibility that the Chinese will conclude a regional trade deal of their own.

The Regional Comprehensive Economic Partnership being proposed has the potential to bolster the Chinese position in the region to the detriment of the US. Trump voters need to be careful what they've wished for, and subsequently voted into office. 
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China's orgy of consumption I Companies

Jack Ma's Alibaba took a small anti-Valentine's day celebration and has turned it into the world's biggest online shopping event.

Graham Watson's insight:
It's 'Singles Day' in China, 11/11, and this FT clip looks at how it's grown from a small event at Nanjing University to the world's largest orgy of consumer spending. And all of this in a country where consumption is a relatively small proportion of GDP, but where the middle-class is growing, and consumption can only grow further in future. 
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China fights back against the forgers

China fights back against the forgers | China: Pre-U Economics | Scoop.it

The steps of Shanghai’s science and technology museum might not seem like an obvious introduction to China’s counterfeit culture but below the building, designed to celebrate innovation, is a lair of subterranean shops that offers just that.

Graham Watson's insight:
Excellent, in-depth article that looks at the Chinese attitude to counterfeit goods and suggests that the attitudes of the authorities is changing. In the past, there was tolerance of forged luxury goods; increasingly, though, the police are cracking down.

This might be good news for luxury brands - both Chinese and from other countries. However, it's not that straightforward: there's evidence to suggest that the relationship between counterfeit goods and the real thing isn't of substitutes, and may even be complementary in that people who can't initially afford the real thing buy the counterfeit, and those that can are, to a large extent able to differentiate between the two.
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The scale of China's spending will be turbo-boosted by technology

The scale of China's spending will be turbo-boosted by technology | China: Pre-U Economics | Scoop.it
There are two truths now universally acknowledged about Chinese consumers: First, that they’re descending on the streets of London to snap up post-Brexit bargains and second, the rate of their spending is slowing.
Graham Watson's insight:
The Telegraph's Ashley Armstrong seems taken aback by the Chinese consumer in two ways: Their spending power, and the way that they exercise it, via modern technology.

She's not been in my 5Ec classes - but the article's none the worse for that.
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The risks and benefits of China weakening its currency - BBC News

The risks and benefits of China weakening its currency - BBC News | China: Pre-U Economics | Scoop.it
Guiding the yuan lower, China has to walk a fine line: a weak currency helps exporters but it risks capital flight.
Graham Watson's insight:
I'm not planning to 'scoop' lots of articles from last week, but it strikes me that this is essential reading for Sinophiles, considering the dangers of a falling currency for the Chinese economy.

In stretch and challenge terms, it might be worth thinking about this and the depreciation of the pound too. How are the two similar? Equally, how are they different?
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China's economy grows steadily at annual rate of 6.7% - BBC News

China's economy grows steadily at annual rate of 6.7% - BBC News | China: Pre-U Economics | Scoop.it
China's economy grows at an annual rate of 6.7% in the three months to September 2016 the country's statistics bureau says.
Graham Watson's insight:
The latest China data suggests that growth is stabilising, much to everyone's relief but bear in mind that China' growth statistics are unreliable, not least because of the speed with which they are produced, but because of the vested interest of the government in shaping them.

However, as things stand, this will be the lowest rate of growth in China since the aftermath of Tiananmen Square.
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China must wean itself off debt addiction if it is to avoid financial calamity, warns IMF chief

China must wean itself off debt addiction if it is to avoid financial calamity, warns IMF chief | China: Pre-U Economics | Scoop.it
China is edging towards "financial calamity" and must wean itself off its debt addiction and reform if it is to avoid a crisis, the International Monetary Fund has warned.
Graham Watson's insight:
I'm sure that the Chinese government are exceptionally grateful for Christine Lagarde's input, but it's another voice expressing growing concerns about the sustainability of the Chinese growth model. The debt:GDP ratio is growing, and credit growth outstrips growth in GDP - surely, something's got to give?

That said, China's not a 'normal' economy; however, the levels of debt in the financial sector must be a concern.
 
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Ethiopia set to inaugurate new rail line

Ethiopia is set to inaugurate a new $4 billion rail line between Addis Ababa and Djibouti to knock journey times down from days to hours. Paul Chapma
Graham Watson's insight:
"Ooops, they did it again" as Britney Spears may or may not have sung. However, the opening of an Ethiopia - Djibouti rail line is going to have a dramatic effect on journey times - and potentially, the cost of exporting from one of Africa's fastest growing economies.

You'll never guess who built it.
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Chinese authorities need to guard against bad debt crisis

Chinese authorities need to guard against bad debt crisis | China: Pre-U Economics | Scoop.it

It’s time for another China disaster story. The world seems to have a decided appetite for them. Not long ago, attention focused on the Chinese stock market. Supposedly, the sharp fall in stock prices in the summer of last year presaged some sort of economic disaster.

Graham Watson's insight:
Roger Bootle writes, rarely for him, on China, and the prospects of a Chinese debt crisis. His view? Yes, Chinese banks are heavily indebted but that the government has the capacity and the will to bail them out, in a way that Italy, for example, hasn't.

If the Chinese government were to bail out the banks it might see government debt rise to 90% of GDP but that is in the context of a growing economy. Italy already has far higher debt government debt levels and an economy that's going nowhere fast.  
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Anger in China over peer-to-peer lending losses - BBC News

Anger in China over peer-to-peer lending losses - BBC News | China: Pre-U Economics | Scoop.it
Anger has been boiling over in China over the controversial practice known as peer-to-peer lending, with investors in one firm saying they have lost tens of millions.
Graham Watson's insight:
Another interesting insight into the financial sector in China. Because of state-control of the financial sector, the interest rates charged to commercial borrowers (largely SOEs) are lower than those offered to savers (Joe Public). Hence, it's little surprise that some of these people have opted to look for alternative places to put their money.

One such option is peer-to-peer lending, P-2-P, which has also taken off in the developed world. However, claims are surfacing that not all is what it seems, and protests have started. You might note that the state has a particular way of dealing with media coverage of them.

However, suggests that, debt aside, the financial system in China might be struggling to meet its obligations.
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China clamps down on capital flight | World

China is preparing new restrictions on outbound foreign investment in an effort to curb capital outflows that are putting downward pressure on the renminbi and draining foreign exchange reserves
Graham Watson's insight:
The Chinese are getting twitchy about the amount of money flowing out of the economy, worrying about the possibility of capital flight and have thus introduced restrictions on outward foreign investment.

The worry is that the renminbi is being driven lower, foreign exchange reserves are being drained and that this has adverse consequences for the long-run performance of the Chinese economy. Can you think how?
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China sets world record for patent applications

China is driving Asian-led growth in innovation worldwide, becoming the first country to file 1 million patent applications in a single year, according to the World Intellectual Property Organization.
Graham Watson's insight:
They're innovative the Chinese - the first country to file 1 million patent applications in a year. But how would you evaluate this?

Is it the result of innovative or replicative entrepreneurship? Are these significant patent advances or patents designed to act as a barrier to entry? And look at where those applications have been filed - within the country. So there's more to this than meets the eye. Nevertheless, it represents a "Great Leap Forward" as the Reuters correspondent suggests.
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Helping Chinese Farmers Use Water More Efficiently

A World Bank-supported water conservation project integrates agricultural and management aspects, not just technical measures, to address water use and to help change farmers’ behaviour

in the provinces of Hebei, Shanxi and Ningxia in China.

Graham Watson's insight:
This World Bank clip highlights the issue of water shortages in China, and how technical assistance from the Bank has changed attitudes and behaviour in the agriculture sector in three provinces.  
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Teaching Mandarin: Chinese influence in Kenya’s slums - BBC News

Teaching Mandarin: Chinese influence in Kenya’s slums - BBC News | China: Pre-U Economics | Scoop.it
In Kenya Chinese companies are investing heavily in some of the country's poorest communities, yet as Chinese investment increases, so too do tensions between foreign contractors and local workers.
Graham Watson's insight:
Proof of the extent to which China is invested in Africa? This BBC article highlights the fact that the Chinese are even investing in the poorest parts of sub-Saharan Africa, and bringing their language and culture too.

Elsewhere in the article, some of the tensions between Chinese entrepreneurs and Africans are highlighted; it's not always plain sailing. 
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Theresa May promises 'golden era' in UK-Chinese relations - BBC News

Theresa May promises 'golden era' in UK-Chinese relations - BBC News | China: Pre-U Economics | Scoop.it
Theresa May has promised to work for a "golden era" in the UK's relations with China, as the country's vice-premier visits London for talks.
Graham Watson's insight:
C'est plus ca change, as I'm led to believe they say in France.

Observe with me, how the rhetoric of the Prime Minister has changed from when she took office, all of four months ago. Then, she urged caution about dealing with China, notably over Hinkley Point, today she's sounding increasingly Osbornian. What a surprise - but as yesterday proved, it's almost impossible to under-estimate the intelligence of the electorate.

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Starbucks looks for China caffeine hit - BBC News

Starbucks looks for China caffeine hit - BBC News | China: Pre-U Economics | Scoop.it
Starbucks records its "most profitable year" and says it is focusing on China to secure growth "for decades to come".
Graham Watson's insight:
If proof were needed of China's increased wealth, and perhaps the fact that it's no longer a Low Income Country (LIC), then Starbucks entry to the Chinese market makes this official. 
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Bicester Village's luxury expansion into Shanghai betting on the rise of the domestic Chinese shopper

Bicester Village's luxury expansion into Shanghai betting on the rise of the domestic Chinese shopper | China: Pre-U Economics | Scoop.it

After 40 minutes of swerving through Shanghai’s dense traffic and even thicker fog, the instantly recognisable turrets of Disney’s Enchanted Castle puncture the grey skies, a symbol of China’s rapid, commerce-driven society. On the other side of the four-month-old Disneyland Park is Shanghai Village, a gleaming new luxury retail resort that is an ambitious joint venture between Value Retail, the owners of Britain’s Bicester Village, and state-owned enterprise Shanghai Shendi.

Graham Watson's insight:
Very few people know that Bicester Village is the 2nd most visited destination for Chinese tourists; however, the company that owns it has recently expanded into China too, gambling on the growth of the Chinese middle-class.

This is an excellent article that highlights longer-term consumer trends: the size of China’s retail market is tipped to overtake the US for the first time this year, and as the head of Value Retail notes "By 2030 there will be 255m middle-class people…almost most equal to the entire US population.”

Worth a punt, then?
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China's economy in 90 seconds | FT World

Growth of 6.7 per cent might be too high for China, with debt outpacing output growth. The FT's Yuan Yang explains.

Graham Watson's insight:
The FT summarises the current state of play in China: is the economy still growing to quickly? And what about the growth of debt?  And the implications for rebalancing?

At the moment there are few signs of a satisfactory outcome in response to all of the above.
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Jack Raymond's curator insight, October 27, 3:56 AM
The FT summarises the current state of play in China: is the economy still growing to quickly? And what about the growth of debt?  And the implications for rebalancing?

At the moment there are few signs of a satisfactory outcome in response to all of the above.
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Brexit makes China keener to strike a trade deal with Britain, says ambassador

Brexit makes China keener to strike a trade deal with Britain, says ambassador | China: Pre-U Economics | Scoop.it

China wants to do more business with post-Brexit Britain, the country’s ambassador to the UK said, as he praised the City of London and Britain’s financial prowess.

Graham Watson's insight:
Straightforward article looking at UK-China relations but with a twist. Why is China 'keener' all of a sudden?

Is it because it sees the UK as a bastion of free trade and is, itself, a devotee of economic principles?

Or because it sees Britain as having a weaker negotiating position outside of the EU, and keen to exploit that?

I couldn't possibly speculate...I'm no China expert.
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Is China tougher on foreign firms? - BBC News

Is China tougher on foreign firms? - BBC News | China: Pre-U Economics | Scoop.it
China is notoriously tough for foreign firms to crack, but is it making it deliberately difficult?
Graham Watson's insight:
This BBC clip looks at whether dealing with China is 'unfair' with foreign firms being forced into joint ventures, so-called 'forced technology transfer'.

But is this a fair perspective? There's a suggestion that regulators are over zealous, and counterfeiting and the loss of IPRS is still a major problem. As the presenter signs off - there's a difference between trading with, and trading in China.
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UK shops look to Chinese tourists for a golden week at the tills

UK shops look to Chinese tourists for a golden week at the tills | China: Pre-U Economics | Scoop.it
Travel agents report big demand for UK visits during holiday week due to 20% fall in costs after sterling’s post-Brexit vote dip
Graham Watson's insight:
A cute little article that highlights the fact that, increasingly, we look to the Chinese. For everything from nuclear power, London taxis and now growing tourist numbers, we're hoping for greater Chinese spending in the UK.
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Dell Technical Support Phone Number 1 (800) 204-4427's curator insight, October 3, 3:42 AM
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Pigeon lofts and tulip fever: What is going on in China’s property markets? - BBC News

Pigeon lofts and tulip fever: What is going on in China’s property markets? - BBC News | China: Pre-U Economics | Scoop.it
Why are property prices rocketing in China at a time when the economy is slowing down?
Graham Watson's insight:
Karishma Vaswani raises the prospect of current trends in Chniese property markets being indicative of a dangerous 'bubble' and the implications of this for the wider economy.

As a bit of a 'tulip fever' buff, I'd recommend a lot of books - Philip Dash, Deborah Moggach and even Alexandre Dumas' "The Black Tulip" for starters.

Quite what this has to do with China...well, all are illustrative of the irrationality of 'bubbles', the forces which temporarily sustain them and the dangers associated with them.
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