Tag Archives: China

Chinese Vice President Xi Visiting US for High Level Talks

Economy, Emerging Markets, , ,

High level talks are scheduled this Tuesday between President Obama and the up and coming leader of China, Vice President Xi Jinping. Xi is hoping that the talks will boost his international standing while he simultaneously tests Obama’s ability to balance diplomacy with China and his election-year pressures.

Xi’s visit has been carefully planned by his Chinese handlers so that it the once-every-ten-year Chinese transfer of power is accepted by Washington and the world as a significant rite of passage. Xi is expected to take the helm of the Communist Party, which leads China, later on in 2012, and then finally taking over the Chinese presidency in March of 2013.

The fifty-eight year old Xi arrived in Washington on Monday and was greeted with a dinner with veterans of US foreign policy, including former national security advisers Brent Scowcroft and Zbigniew Brzezinski. Former Secretary of State Madeleine Albright was also on hand.

Obama has been working on changing US economic policy toward Beijing quietly, trying to find new ways to get results on such touchy issues as improved market access and better currency practices with China which have historically been thorns in the sides of Obama as well as his predecessors.

Xi is the highest ranking Chinese official to visit the US since Obama began his new US leaning toward Asia, began in November. Obama would like to see a more balanced relationship with Asia, reducing China’s increasing assertiveness in the region.

Manufacturing Sees Shift from Asia Back to USA

Economy, , , , ,

Ironic Economics

In what some analysts see as a bit of economic irony, there is a slow but steady in the manufacture certain products away from Asia and back to North America.

“What you’re starting to see is the economics shifting more into the United States’ favor regarding sourcing from the United States versus sourcing from a low-cost country,”

said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a Washington trade group.

The irony is that it is precisely because the US is going through a slow economic period and China and India are experiencing brisk growth as their emerging economies surge that help US manufacturers to minimize the cost gap between them and their Asian rivals.

Wage Gap Closing

According to one consulting group it is even possible that by the year 2015 labor costs in China and the US could achieve parity. If the present Chinese inflation rate of 5.5% continues while the US maintains the lower 3.6% rate of inflation, and if Chinese wages continue rise at the present 15- 20 percent, then wages in the US and China could very well be indistinguishable.

Efficiency Helping US

In Milwaukee, at the Master Lock factory, the shift back to “made in the USA” is already happening in full force. Just two years ago the lock-making machinery there was only running a few hours a day because it was cheaper to order padlocks from China rather than making them at home.

Today the lock-making machine is running at a whirlwind pace seven days a week and three shifts per day. How can this be when wages are six times higher in the US than in China? The answer is because of superior efficiency. In Milwaukee locks are produced thirty times faster than in the factories in China, which more than makes up for the wage gap.

“I can manufacture combination locks in Milwaukee for less of a cost than I can in China,”

said Bob Rice, a senior vice president at the largest U.S. padlock manufacturer.

In the past two years Bob Rice has added about 80 workers to his workforce, which totals 440 at the moment, and could very well continue to rise. A good sign for the future of US manufacturing.

Obama Talks Tough on Unfair Chinese Economic Policies

Emerging Markets, , , ,

The closing press conference of last week’s Asia-Pacific Economic Cooperation Summit saw President Barack Obama talking tough to China, criticizing several of China’s economic policies which work against the economic interests of the US and other countries.

Scoring Points

Obama scored some major victories at the historic summit, achieving a crucial breakthrough in his push to organize a pan-Pacific free trade zone while also promoting the greater use of green alternative technologies.

“Enough is enough,” Obama cried, using unusually tough language with China, only one day after having direct talks with Chinese President Hu Jintao. Obama insisted that China stop “gaming” the international business community and begin to create a “level playing field” for US businesses and others.

“We’re going to continue to be firm that China operates by the same rules as everyone else,” Obama told reporters after hosting the 21-nation APEC summit in his native Honolulu. “We don’t want them taking advantage of the United States.”

Dragon Not Cowed

China’s response was swift and to the point: “Why should we abide by international economic rules that we had no part in writing?”

“First we have to know whose rules we are talking about,” Pang Sen, a deputy director-general at China’s Foreign Ministry said.

“If the rules are made collectively through agreement and China is a part of it, then China will abide by them. If rules are decided by one or even several countries, China does not have the obligation to abide by that.”

Time to Invest in Chinese Companies

Economy, Emerging Markets, , , ,

US and EU Hit Hard

The global economic crisis – as we all know – hit hard.  Especially tough impacts were encountered by the European Union and the United States of America.  These regions are today, still being impacted by the crisis, vis-à-vis an uncertain economic future and increasingly high levels of public debt.

China’s 2008 Plans

In reaction to the crisis in 2008, China sensibly set out plans to help make world financial markets more stable.  The country – as companies that seek to make investments there have known for years – is usually on top of its economic situation and what it needs to do to stabilize matters where required.  This is what makes it an ideal environment for companies such as ARC Investment Partners to put their capital.

China Thinking Ahead

This clear thinking during a tough time for Chinese companies, really made a lot of sense for the country’s economic future.  Today, China is a hotspot of stable economic growth, along with a substantial foreign exchange reserve.  The question thus being asked, is can it also now play a role in finding a solution to the world’s current financial issues?  Maybe.  But first, the rest of the world needs to get on board and formulate an accurate perspective of the advantage of making investments in China today.  Some critics firmly believe that if America and Europe really look into investing serious capital into China, a lot of their financial woes would be dissipated.

In other words, America and Europe need to get over their paranoia that investing in China is troublesome due to the country’s national security concerns or other inaccurate perceptions

Coca-Cola Conquest

Consumerism, , , ,

Coca-Cola just reported a rise in profit of 18 percent, rendering their profit margin to $2.8bn in the second quarter, as compared to last year.  The demand from China for the beverage went up to 24 percent.  Sales of the carbonated beverage also escalated somewhat in Europe.

At the same time however, what might be a tad surprising (and disappointing) to Coca-Cola consumers, is the fact that according to a recent BBC news article, the company is planning on elevating prices on its drinks “to reflect higher costs” it has been incurring.  Fanta and Sprite will also be included in this price change that will result in a 3 to 4 percent addition.

Coca-Cola Growth Targets

More good news for Coca-Cola came in a statement from Muhtar Kent, the company’s Chairman and Chief Executive.  He said that the company’s results were “well ahead of [its] long-term growth targets.”  He added that the company was “delivering these strong results at a time when global macroeconomic conditions are at best mixed.”  This is great news for the company.

US Slowdown

North American sales of Coca-Cola have dropped somewhat, possibly since the predictions for “US consumer demand remains uncertain amid a weak labor market.”  Further, volatility encountered in commodity markets has been seen as a possible reason for the continuation of increasing prices for both packaging and sweeteners.  Coca-Cola thus feels its own pricing must reflect this.