The Great Debate UK

from Davos Notebook:

CEOs hoping that everything comes up roses

CHINA-VALENTINE'S/A few things struck me from the annual survey of CEOs that PwC (yup, PricewaterhouseCoopers likes big 'P', little 'w', big 'C') released at Davos this year.

The most obvious was that 48 percent said they were "very confident" of growth in the next 12 months - up from 31 percent last year. Pre-crash confidence again!

But I have to say, I wondered a bit about their crystal ball when 37 percent said they planned to shift sourcing to China -- with cost being the most cited reason. With inflation looming and currency moves almost certain, that isn't necessarily a bet I'd make. There are plenty of reasons to go to China -- and I've staked my career on it since 1979 -- but cost isn't top of my list in 2011.

The other thing that caught my eye was that managing talent was top of the CEO agenda -- higher even than managing risk, investment decisions, reputation or capital structure. But alas, for those hoping for a pay rise out of it -- strategy number one was "use more non-financial rewards to motivate staff". I'll be sure to ask my CEO Tom Glocer for a pat on the head while we're here together in Davos!

Who is helping who in the China-Europe relationship?

-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.-

PORTUGAL/

The saying goes that you only really know who your friends are during times of crisis. Well European officials must have been beaming after two of the world’s largest economies promised to purchase the debt of the currency bloc’s most troubled nations. China came out first and pledged to “support Spain’s financial sector”, through participating in its upcoming debt auctions. Likewise, Japan pledged to purchase a quarter of the upcoming euro zone bond sale that will help fund the bailout of Ireland.

from Davos Notebook:

Will Goldman’s new BRICwork stand up?

RTXWLHHJim O'Neill, the Goldman Sachs economist who coined the term BRICs back in 2001, is adding four new countries to the elite club of emerging market economies. But does his new edifice have the same solid foundations?

In future, the BRIC economies of Brazil, Russia, China and India will be merged with those of Mexico, Indonesia, Turkey and South Korea under the banner “growth markets,” O'Neill told the Financial Times.

from Breakingviews:

Low expectations should make China do more on yuan

By Wei Gu

The following article is part of Reuters Breakingviews' e-book, Predictions for 2011. The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

HONG KONG -- The Chinese currency rose just 3.6 percent in 2010. As political pressure ebbs and euro zone trouble spreads, traders now expect an even smaller gain for 2011. Beijing has said it wants to make the yuan more flexible. If it really means that, low expectations create a window of opportunity.

from Breakingviews:

China may stub its toe on rare earths quotas

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

HONG KONG -- China may stub its toe on its rare earths quotas. By restricting exports of the metallic elements, it is hoping to give domestic industries a boost. But Chinese companies will lose if the move leads to trade restrictions or boycotts of overseas acquisitions. If Beijing is serious about addressing environmental concerns, it should cut rare earths production, not exports.

from Global News Journal:

Perilous predictions for 2011

Afghan Boy

It’s the season to be merry - and to make forecasts about next year. Across the finance industry fine minds spend December crafting outlooks and extrapolations about how the world will fare, in the hope of a decent return over the next 12 months and avoiding the bear traps that will swallow an investment. The banks, strategic advisories and political risk consultants trumpet their analytical prowess, of course, but are also meeting a natural human need to peer into the future. We all want guidance to take the sting out of living in an uncertain world.

Nowhere is prediction more fraught with peril than in politics and world affairs. The success rate is in inverse proportion to the costs that unexpected acts in the real world can impose on the investor. So despite the difficulty of providing a reliable guide to the future there are huge incentives to try to chart the way ahead. Here's  Control Risks, a risk consultancy firm, on its view of 2011, while competitor Eurasia reveals in early January, as does the World Economic Forum. Nomura has a list of 10 political challenges to prosperity that range from the prospect of gridlock in US domestic politics to brinksmanship on the Korean peninsula.

from Breakingviews:

Trade should leave China and India both winners

Decades of mistrust haven't stopped China and India's trade from tripling in the past five years. Now China wants to restart free trade talks when Premier Wen Jiabao visits New Delhi later this week. India has long resisted such an agreement. Yet more open trade should leave both sides winners.

Since the two countries warred over a border dispute in 1962, China and India have had a fractious relationship. But on some issues they agree. India helped China stop an agreement over climate change in Copenhagen that both felt was too soft on rich countries. Chinese and Indian state-owned firms have bid together for oil and gas assets.

from Reuters Investigates:

China’s rebalancing act puts consumer to the fore

consumerWal-Mart, the world's largest retailer, now has 189 stories in China, according to its website. Soon it will have many more.  The U.S. chain has announced plans to open a series of "compact hypermarkets", using a bare-bones model developed in Latin America, the Financial Times said.

Wal-Mart stores are a bit different than the one's you might find in, say, Little Rock Arkansas. They sell live toads and turtles for one thing, The Economist reported. But they also sell the appliances, gadgets, and housewares that Wal-Mart stores merchandise everywhere.

from Breakingviews:

Seaweed boom shows China’s inflation challenge

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

HONG KONG -- It sounds like the ultimate proof of China's runaway economy: a seaweed bubble. After garlic and green bean manias, food inflation is now asserting itself in a 20 percent rise in seaweed prices in the last year.

from MacroScope:

Building BRICs in Africa

Some eye-catching numbers from Standard Bank out today on the influence of BRICs countries -- Brazil, Russia, India and China -- on Africa.

First off, the bank says the global recession and its recovery have been nourishing these so-called South-South ties. But it is all now ready to take off. The bank estimates:

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