The Bankwatch

Tracking the consumer evolution of financial services

Is China the next Lucent?

This is an interesting article over at Foreign Policy. It is interesting because it fits in the meme of what recovery looks like. Regular readers will by know by now I am firmly in the space that recovery will be framed by a smaller economy, and slower growth of that smaller economy.

This piece compares the Chinese economy to Lucent during the dot com bubble. Lucent were selling to dot com company’s which disappeared. China was selling to US and to a lessor extent European consumers who have … disappeared. The minor distinction is that the consumers actually still exist, but the $64K question is what we can expect from their spending patterns. So the context for the article is whether China has a manufacturing infrastrucuture that is overbuilt for what the world requires?

Of course the articles point is the impact of a China crash on the world economy. My concerns are a bit more prosaic. I assume smaller economies and lower velocity of money.

How banks should orchestrate their product design and marketing stratagy. In a chat this week with a retired senior executive from a Canadian bank Thursday, he noted an increase of 200 basis points that banks were achieving in lending to prime corporate customers. These are multi million dollar loans. Lending and liquidity are not the issue anymore. The issues are risk and attractiveness of market segments. We have seen a dramatic explosion of growth in the consumer market over the last 17 years. That bubble is gone. How should banks design their approach going forward now?

My focus here is 100% consumer, and I will leave the corporate stuff to the experts. I remain convinced costs will have to be squeezed out of the Banks’ consumer delivery model, and that means in simplistic terms, less branches and more internet.

Interesting stuff.

[UPDATE:]

From the FT this morning

Chinese steel executive beaten to death

By Richard McGregor in Beijing

Published: July 26 2009 11:51 | Last updated: July 26 2009 12:17

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The privatisation of a state steel company has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their firm, according to a Hong Kong rights group.

The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state firms in industries targeted for consolidation.

Written by Colin Henderson

July 25, 2009 at 16:43

Posted in economy

Tagged with , ,

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