The Great Debate UK

from The Great Debate:

For Chinese exporters, grass is greener abroad

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WeiGucrop.jpg- Wei Gu is a Reuters columnist. The opinions expressed are her own. -

The U.S.-China tire dispute threatens to spill into other sectors and squeeze Chinese exporters' already razor-thin margins further. 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 volumes large enough 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 tire 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.

from The Great Debate:

China’s coming magnificent bubble

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jamessaft1.jpg--James Saft is a Reuters columnist. The opinions expressed are his own--

If and when China makes its currency convertible and opens its financial system the stage will be set for a bubble that should make the dotcom and housing booms look tame.

China has recently signaled its key aspirations: for a greater international role for the renminbi and for Shanghai to become a great financial capital. Neither is imminent, but both imply, if not require, a series of steps that, taken in combination with China's legitimately great potential for growth, could lead to a bubble of magnificent and dangerous proportions.

from The Great Debate:

Five overlooked global risks

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Rafael Ramirez is James Martin Senior Research Fellow in Futures at Oxford University's Institute for Science, Innovation and Society. His latest book is "Business Planning for Turbulent Times: New Methods for Applying Scenarios" edited with John W. Selsky and Kees van der Heijden. -- Rafael Ramírez is the James Martin Senior Research Fellow in Futures at Oxford University and author of "Business Planning for Turbulent Times: New Methods for Applying Scenarios" edited with John W. Selsky and Kees van der Heijden. Ramírez attended a session at the World Economic Forum's gathering in Dalian, China, on managing global risks.

Reuters asked Ramírez to elaborate on five overlooked risks the world is confronting as it works its way through the current recession. His response is below. The views expressed are his own.

from Commentaries:

U.S.-China trade spat more about cars than tyres

Why are the U.S. and China trading blows about something as mundane as car tyres at a time when the world is trying to avoid slipping back into trade protectionism?
It's not purely about the $1 billion worth of tyres China sells to the U.S. every year. It has more to do with the $100 billion of automotive vehicles, parts and engines America buys from abroad. China is worried about the direction of U.S policy. Beijing fears that the administration may find ways to thwart China's future plans to ship vehicles to America.
China may not yet export cars to America, but it already exports a growing number of parts. Cars are in the pipeline. A recent spate of bids from Chinese companies such as Geely for failing U.S. and European auto brands have shown that it has the ambition to be the next Japan or Korea.
Auto sales are the only bright spot in U.S. consumer spending due to the Treasury-financed "cash for clunkers" program. Fears about stimulus dollars leaking abroad are one of the reasons the U.S. trade unions have been aggressively pushing for anti-dumping tariffs.
The worry is that the U.S. has imposed the tariffs under a law designed to protect domestic U.S. producers from being damaged by a sudden surge in imports from China. Determining whether this has occurred is a bureaucratic exercise in which experts determine whether such damage is occurring and propose remedies. But there is a political circuit breaker -- the president has discretion in whether to implement remedies.
At least four similar, so-called Section 421 petitions were filed during the presidency of George W. Bush, according to the international trade commentator, Scott Lincicome, but none were approved. In this case, Obama came down on the side of the union. This has raised fears in Beijing that there will be more cases in coming months.
The Chinese side seems to fear that Obama is bending too much to domestic constituencies such as union and producer interests. Washington needs to be careful about this. Since it wants to export its way out of recession, it should not agitate China, which is potentially a major purchaser of U.S. exports.
China does not want the Obama presidency to set a precedent by discriminating against Chinese goods at this time. Moreover, it is concerned that other countries might follow suit and start to target Chinese goods as well. Its reliance on exports is potentially the big weak link among China's recovery.
That's why Beijing, which has limited its protest mostly to words in recent years for fear of more retaliation, quickly spun into action this time. China's counterpunch is equally forceful. It is launching an anti-dumping investigation into imports of U.S. chicken products and vehicles.
The idea is presumably to raise the political cost for Obama of taking his pen out of his pocket every time a Section 421 case, which specifically targets China, is presented for his signature.
During the first half of this year, 89 percent of China's chicken imports came from America, representing a fifth of all U.S. chicken exports. In comparison, tyres account for just 0.4 percent of the value of goods what China sells to America each year and 0.07 percent of China's total exports.
While it is no secret that America subsidises its agriculture industry, China also spares no effort in helping exporters and putting up import barriers to protect domestic manufacturers. For example, China agreed in August to stop some discriminatory charges it imposed on imported U.S. auto parts after a World Trade Organization ruling from September 1.
After chicken, U.S. soybeans might be the next target. As much as 40 percent of China's soybean imports came from America last year. And this year, China's soybean imports increased by 28 percent.
The last time China took retaliatory measures was during the "garlic trade war" against Japan and South Korea in 2000-2001.
Washington and Beijing have vowed to cooperate in seeking to revive global economic growth, but the dispute over tyres has laid bare the two countries' continued friction over trade. This could spill into the G20 summit later this month and Obama's scheduled visit to China in November.
In previous meetings between the top leaders of the two countries, mostly the U.S. lectured and China listened. Now Beijing is more outspoken about expressing its own concerns and many at home are calling for more tit-for-tat policies.
It remains to be seen how the U.S. will react to a more assertive China.

from The Great Debate:

Collaboration is the key to economic growth

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aron-cramer-- Aron Cramer is president and CEO of BSR, a global business network and consultancy focused on sustainability. The views expressed are his own. --

As the World Economic Forum’s “Summer Davos” meeting in Dalian, China, gets underway, it is a bit chilling to think back to how the financial crisis was unfolding in real time during last year’s event.

Re-entry dilemma for G20 ministers

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copeland1- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

As the G20 ministers gather for their meeting this week, there should be no doubt about the item at the top of the agenda: the re-entry problem. At what point should the expansionary monetary and fiscal policy of the past year be reversed? And, if the answer is “not yet”, how soon does the re-entry plan need to be announced?

British broadcasting deserves better than Murdoch attack

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barnett- Steven Barnett is professor of communications at the University of Westminster, and a writer and commentator on broadcasting issues. He is finishing writing a book “Just Wires and Lights? The Rise and Fall of Television Journalism” that will published by Sage in 2010. The opinions expressed are his own. -

I was in the audience for Murdoch senior’s MacTaggart lecture 20 years ago, and was shocked –- as were many others –- by the ignorance and shallowness of his analysis. It wasn’t just the blatant self-interest of promoting his newly launched Sky channels; it was the sheer incomprehension of British television’s achievements in broadcast journalism compared to its manifest failure in the United States. Murdoch senior pretended it was the other way round, a strange distortion of the empirical evidence.

from Commentaries:

Bon chance getting this deal done, Alcatel-Lucent

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It beggars belief that humbled telecom equipment supplier Alcatel-Lucent could be scooped up by a Chinese rival with nothing better to do. Huawei or ZTE seem credible candidates. The question is, why would they ever bother?

PLA soldiers perform during a rehearsal of a musical drama in Beijing

That didn't stop shares of Alcatel-Lucent from rocketing up as much as 21 percent on Wednesday on rumors of an unnamed suitor. Momentum was helped by a rating upgrade on the depressed stock by French broker Natixis. The shares later settled back somewhat to trade at 2.75 euros, up 12 percent on the day in Paris.

from The Great Debate:

Forget Microsoft, Yahoo’s value is overseas

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-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

eric_auchard_columnist_shot_2009_june_300_px2The fate of Yahoo Inc has become intertwined in the public's imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That's despite the fact that as much as 70 percent of the value investors put on Yahoo's depressed shares are tied up in its international assets or cash holdings -- factors that have nothing to do with Microsoft.

from The Great Debate:

China’s banks, running hard to stand still

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wei-gu.jpg-- Wei Gu is a Reuters columnist. The opinions expressed are her own --

Chinese banks are like enthusiastic runners on an accelerating treadmill. The weakening economy means poor lending decisions are threatening to catch up with them, but the banks are sprinting ahead by expanding their loan books ever faster. They cannot keep this up for ever.

For now things still look fine. China Banking Regulatory Commission (CBRC) this week claimed that Chinese banks were managing credit risk sagely, pointing to record low non-performing loan ratios. Given the massive increase in the number of loans outstanding -- up 24 percent since the start of the year -- it's not surprising that the proportion of them that are non-performing at large commercial banks, which accounts for 60 percent of the lending, has declined from 2.4 percent to 1.8 percent in the past six months.

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