Commentaries
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For Chinese exporters, the grass is greener abroad
The U.S.-China tyre dispute threatens to spill into other sectors and further squeeze Chinese exporters’ already razor-thin margins. It might seem mind-boggling to many that Chinese manufacturers are still hanging on to weak overseas markets even though the domestic economy looks much healthier and surely offers more potential.
But there are structural reasons why the grass is greener outside China. The risk of not getting paid, or getting paid late, is significantly lower when dealing with foreign buyers. The cost of international shipping has dropped so much that it can be cheaper to send goods over the Pacific Ocean than across the country.
In addition, selling to large buyers such as Wal-Mart creates enough volumes to compensate for weak margins. Moreover, Chinese exporters get all sorts of export rebates and local government incentives which help to lower their costs.
But as the tyre spat has illustrated, Washington can slap punitive duties on Chinese imports simply by pointing to a significant increase in imports from China. By imposing penalties in this case, President Obama has opened the door for a slew of similar complaints against Chinese goods. It will only be a matter of time before other countries, worried about where those displaced Chinese exports might end up, start to follow suit.
Investor protection, Singapore style
Who needs a whole new government agency to protect consumers from irresponsible banks? Authorities in Singapore have taken a refreshingly straightforward approach in tackling banks deemed to have been less than scrupulous when selling structured notes dragged down by the failure of Lehman Brothers: they banned them.
The Monetary Authority of Singapore on Wednesday banned 10 banks from selling structured notes until they can prove that they have improved processes to highlight the risks involved. Banks including DBS and ABN Amro, now part of Britain’s Royal Bank of Scotland, are out of the business for at least six months. Hong Leong Finance receivd a two-year ban. (The full list is here.)
Banks must brace for creditcard pile-up
Credit card delinquency figures bring to mind the rock classic “You Ain’t Seen Nothing Yet.”
Ever after today’s record report — delinquencies jumped to 6.6 percent of all card debt in the first quarter from 5.52 percent — the peak may still be far off.
Job losses still ginormous
ADP this morning came out with its survey of joblessess, reporting that private sector nonfarm payrolls dropped by 473K in June, but noted that losses originally reported in May and April were slightly less than had been originally reported.
Some may take this as a reason to celebrate since -473K marks another month showing a slowdown in job losses since they hit their peak at -736K in March. But 473K jobs lost in a single month, especially given the blood letting we’ve seen since the nosedive in financial markets in September, is still impressive, and worrying.
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The Wall
