The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘China

China continues to display economic strain that will reflect on world economy


In the ‘how is the world doing’ category, this take (from the chairman of Morgan Stanley Asia and author of ‘The Next Asia’ (Wiley), due out in September) on China is consequential for us all. The west imported cheap labour from there for the 15 years preceding 2007, and the after effect is coming home to roost. What will matter to us all, and to banks, is the relative impacts on currency values as the historic imbalances are rebalanced to a different metric.

I have to keep going back to how banks in the west redesign their products and services. The old approach will not apply. Consumers problems reflected in high personal debt were the output of the crisis, and consumer reaction in the west and in China (where they are being laid off by the millions) will be a significant part of the nature of the recovery.

I’ve been an optimist on China. But I’m starting to worry | FT

This outsized bank-directed investment stimulus leaves little doubt as to how bad it was in China in late 2008 and early 2009. An unprecedented external demand shock, stemming from rare synchronous recessions in the developed world, devastated the export-led Chinese growth machine. That triggered sackings of more than 20m migrant workers in export-intensive Guangdong province. Long fixated on social stability, Beijing moved to arrest this deterioration. The government was determined to do whatever it took to restore rapid growth.

Written by Colin Henderson

July 29, 2009 at 14:43

Posted in Uncategorized

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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

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China and America economic future – Ferguson/ Fallows debate


A summary in NYT of the fascinating Ferguson/ Fallows debate at Aspen on the economic relationship between China and US.

Ferguson: US and China are divorcing economically.  China will focus on internal consumption, not exports.  “Depreciation (of US $) is inevitable and the Chinese are working to end the dollar’s role as the world’s reserve currency.”

Fallows: “…  doesn’t know what the future will hold, but he believes that Chinese officials still see the dollar as their least risky investment. Domestically, China will not turn democratic, but individual liberties will expand. He agreed that China and the U.S. will dominate the 21st century, but he painted the picture of a more benign cooperation.”

Chinese Fireworks Display | NYT

I came to the debate agreeing more with Fallows and left the same way, but I was impressed by how powerfully Ferguson made his case. And I was struck by their agreement about what to do. This conversation, like many conversations these days, gets back to America’s debt. Until the U.S. gets its fiscal house in order, relations with countries like China will be fundamentally insecure.

Written by Colin Henderson

July 4, 2009 at 22:48

Posted in economy, US

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No consumer driven economy in US | Geithner in China


Some important messages within Geithners speech in China today that paint a very different next few years compared to the last 10, and as the ‘G2’ move to manage a transition the American economy into one that is very different, yet stable.  And all this to be managed against the backdrop of  the fear of eventual inflation, which would devalue foreign holdings in US T-Bills, something China is acutely aware of.

These macro factors will play a large role in US banks and credit unions strategy design for the next 5 years.

  1. no consumer purchase driven economy in US – with the implication of extended higher Government spending for some time to counter
  2. US consumers save (increasing savings accounts and paying down debt)
  3. China’s manufacturing supply is sold more and more within China, not Wal-Mart

Speech by Secretary Geithner – The United States and China, Cooperating for Recovery and Growth

In the United States, saving rates will have to increase, and the purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past.

In China, as your leadership has recognized, growth that is sustainable growth will require a very substantial shift from external to domestic demand, from an investment and export intensive driven growth, to growth led by consumption. Strengthening domestic demand will also strengthen China’s ability to weather fluctuations in global supply and demand.

If we are successful on these respective paths, public and private saving in the United States will increase as recovery strengthens, and as this happens, our current account deficit will come down.  And in China, domestic demand will rise at a faster rate than overall GDP, led by a gradual shift to higher rates of consumption.

Globally, recovery will have come more from a shift by high saving economies to stronger domestic demand and less from the American consumer.

Written by Colin Henderson

June 1, 2009 at 09:11

Posted in economy, US

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Update to Tanger Med Auto development in Morocco


An update to a post last July 2008.  Nissan have had suspend development of the Tanger Med terminal development in Morocco, but their partner Renault appear to remain in. It is noted that this is a suspension, not withdrawal, and partnet Renault is still in.

This development is significant, and is in the same vein as the Gwadar development in Pakistan being mde by China.  The shape of world commerce is changing, and the current economic crisis just means those changes themselves are changing.

As I asked in July 2008 – where is the Tanger Med for banks – that new beachead, real or virtual that will reshape banking?

Nissan pulls out of Tangier-Med car manufacturing project

As part of a large-scale programme of cutbacks due to the global economic crisis, the Japanese carmaker Nissan decided on Monday (February 9th) to suspend its involvement in the project to build a plant jointly with French firm Renault in the Tangier-Med free zone.

… …

The aim of the Renault-Nissan Alliance project at the Melloussa site at Tangier-Med is to build a car assembly plant with an output of 200,000 vehicles per year from 2010 onwards, with the option of scaling up output to 400,000 vehicles per year in the long term. Measuring 300 hectares, the site is located within the Special Economic Zone at the Tangier-Med port complex.

The industrial super-project is expected to attract a total investment of 600m euros and create over 6,000 direct jobs and 30,000 indirect jobs for component-makers and subcontractors. The forecasts announced by Renault-Nissan managers are based on the expectation that the plant will manufacture cars that will be competitive in external markets.

Written by Colin Henderson

April 26, 2009 at 22:52

Posted in Uncategorized

Tagged with , , , ,

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