The Great Debate UK
- Steve Radley is Director of Policy at EEF, Britain’s manufacturers’ organisation. The views expressed are his own.
This week the index of manufacturing activity in the UK moved into growth territory for the first time in more than a year. While that does not necessarily mean that the recession is over, it does suggest that we should be thinking a bit more about what sort of recovery we are likely to see and how well placed the UK is to meet it.
A common assumption is that a UK recovery will be export-led, taking advantage of a cheaper pound and the large stimulus packages which are likely to lift overseas markets such as China and United States out of the global recession faster than in this country. Looking longer-term, shared global challenges such as security, ageing populations and slowing climate change and adapting to it will create major opportunities for UK companies, particularly in manufacturing.
This raises questions as to how well equipped we are to take advantage of these opportunities. On the positive side, UK manufacturing has become much competitive in recent years with productivity gains outstripping most of our major competitors. A greater focus on innovation, design, niche products and service offerings has helped UK firms shift away from competing on price terns with lower wage cost countries. At the same time, though, we have been slow to take advantage of growth opportunities. Other European countries have made faster inroads into rapidly expanding Asian markets, while nations such as Germany, Denmark and Spain have stolen a march on us in the onshore wind industry, despite the substantial advantages our physical geography provides us.
from The Great Debate:
The world is witnessing a shift in the balance of power, from the West to the East. This shift will take place over decades, and the winners will be:
- Those economies that have financial clout, such as China
- Those economies that have natural resources, whether it be energy, commodities or water, and will include countries, some in the Middle East, some across Africa, Brazil, Australia, Canada and others in temperate climates across, for instance, northern Europe
- And the third set of winners will be countries that have the ability to adapt and change. Even though we are cautious about growth prospects in the U.S. and UK in the coming years, both of these have the ability to adapt and change.
China's sovereign wealth fund has bought a 1.1 percent stake -- worth around 240 million pounds -- in drinks group Diageo, which owns the legendary Irish stout.
China isn't yet among the top five markets for Guinness -- although Johnnie Walker whisky is apparently a favourite -- but the stout does already feature among Diageo's top brands in South East Asia and Japan.
Political and economic logic are set to collide in the byzantine decision-making over the future of German carmaker Opel, the main European arm of fallen U.S. auto giant General Motors.
If politics prevail, as seems likely, the cost to German taxpayers will be higher and the chances of commercial success lower.
The aim of the Berlin government and four federal states, which are sustaining Opel with bridging finance, is to save as many German jobs and production sites as possible. That makes political sense ahead of September's general election. But the business logic is that only a greatly slimmed-down Opel can survive in an industry with chronic overcapacity.
In theory, it is up to GM's board to choose among the three offers it expected to receive on Monday from Canadian-Austrian car parts maker Magna <MGa.TO>, Belgian financial investor RHJ <RJHI.BR>, and, less plausibly, Chinese state-owned auto maker BAIC. But there are several other powerful players with a say. They include the trustees responsible for the company since GM entered U.S. bankruptcy in June, the German federal and state governments, Opel's works council and, last but not least, the European Commission, which must approve the restructuring plan as a condition for authorising the state aid.
Judging from the draft communique of the G8 leaders meeting in L'Aquila, no one is in a particular hurry to talk about ending the domination of the dollar in world currency reserves. Our correspondents at the Italian summit report that the debate being pushed by China and others is likely to be played down.
But the genie is out of the bottle. Beforehand, Beijing floated the idea of alternative to the dollar. Russia and Brazil weighed in with some thoughts. The United Nations also acknowledged earlier this year the desire of some countries for a "more efficient reserve system" in a series of proposals for global financial reform.
Reports that China has asked for a discussion about reserve currencies at next week’s expanded Group of Eight summit in Italy has added to confusion about whether the country wants to dethrone the dollar from its status as the world’s sole reserve currency. But the very fact the issue has been pushed onto the agenda suggests that a fundamental shift is underway.
Given the U.S. government’s enormous borrowing requirements over the next decade to cover the bank bailout, fiscal stimulus and deficits in Social Security and Medicare, the dollar’s reserve status depends on emerging markets’ continued willingness to accumulate U.S. liabilities rather than switching to other stores of value, such as the euro or the IMF’s Special Drawing Right (SDR).
from The Great Debate:
While China has been outspoken in expressing concern about the United States printing too much money, those worries might be better focused at home. No country beats China when it comes to effective monetary easing.
Beijing has scrapped lending quotas, adopted a loose monetary policy and kept interest rates at a four-year low to boost liquidity and promote growth. The policy has worked. China has lent out more money in the first four months of this year than the whole of 2008. Money growth in China is up more than 25 percent this year, versus about 10 percent in the United States. Click here for a related graph.
from The Great Debate:
The Chinese government has backed away from mandating filtering software on all personal computers in China, in a move that averts a dangerous escalation in its censorship powers.
But however controversial and unworkable China's plan to require Internet filters on PCs proved to be, Western firms have largely themselves to blame for creating and selling such filters in the first place.
So far, Europe has left it up to the United States, Russia and China to send people into space. But almost 50 years after Russia's Yuri Gagarin made his first orbit around the earth, it's about time that Europe finally enter the playing field, some say.
"Europe cannot stay out of manned (space) flight forever," EADS unit Astrium Space Transportation's CEO Alain Charmeau said at the Paris Air Show. Europe has its own space agency, ESA; it has its own module on the International Space Station; and it has sent its astronauts into space as passengers on the spacecraft of others.
from The Great Debate:
Chairman Mao used to say the truth is always kept by the minority.
A little-known private Chinese machinery company's bid for a GM marque has been sneered at by even the patriotic Chinese media, but the deal could succeed where mightier plays like Chinalco's for Rio Tinto have failed.
True that private sector firms face an uphill battle in China against more dominant state-backed firms, but it seems like double standards when Western observers, who extol the virtues of the private sector taking the driver's seat, praise Chinalco's deal but dismiss Tengzhong's bid for Hummer.