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2point6billion.com discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.



Monthly Archives: May 2014

Will the Rains Come? Reflections on an India at the Point of Economic Renewal

Op-Ed Commentary: Chet Scheltema, Manager, Dezan Shira & Associates

Monsoon rains sweep across India during the summer after several months of hot, dry weather, turning parched earth into lush and tropical landscape. Besides bringing eagerly awaited relief from the heat, these rains play an important role in sustaining the vibrancy of the Indian sub-continent’s life. Most of its vast population remains rural and highly dependent upon the land’s yield for sustenance. And the wealth of its large urban population depends entirely on the steady surge of India’s river waters flowing from the Himalayan heights. Lacking monsoonal renewal, India’s agriculture production may fail and its water resources dwindle – all with potentially dire consequences. So while traveling in Delhi and Mumbai these past weeks, it was little surprise to hear Indian’s ask this time of year, “will the rains come?” Continue reading

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Increasing Labor Productivity will be key to China Success

By Renaud Anjoran

The conference organized last week by the European Chamber of Commerce in China was extremely interesting.

I took notes during the other speakers’ presentations, and a theme came back again and again: if China doesn’t increase its labor productivity, times are going to get tough:

  • Tough for China because its potential growth will be seriously capped.
  • And tough for the importers, because costs will have to rise a lot.

The necessity of productivity gains for China’s GDP growth

Ben Simpfendorfer, a strategic consultant with an economic background, set the stage:

  • The working population is contracting and this trend will continue;
  • The debt/GDP ratio has been growing but will have to stabilize sometime in the future, so capital investments will need to decrease.

These two trends mean that the only way for China to keep growing at a rapid rate will be through productivity gains.

How to gain productivity? By making farms, companies, and administrations more efficient. And a big part of this effort will have to take place in factories.

The search of manufacturing efficiencies by importers

I asked the panel of experts for their forecast regarding the rate of price increases over the next 5-10 years. Their responses were pessimistic.

They all agreed that prices of Chinese products would increase faster in the next 5 years than they have over the past 5 years!

The main reasons they invoked were as follow:

  • Supply and demand will dictate higher prices, since there will be less labor supply for the manufacturing sector… and more demand, coming in good part from the domestic market;
  • The central government plans for higher wages and a move to more advanced industries.

Will it be very brutal? Probably not. One speaker suggested it might follow a ”stop & go” pace. His meaning is, Beijing will devalue the currency a little if they see they overshot what foreign companies are willing to pay.

So, what are importers trying to do?

The low-hanging fruits have been reaped. Now, improvements to the bottom line will have to come from reduced waste (in other words, higher efficiency all along the supply chain).

That’s why more and more companies are launching lean programs to reduce costs. And why others are getting their feet wet in other Asian countries.

Renaud Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006. In addition, a passion for improving the way people work has pushed him to launch a consultancy to improve factories and a web application to manage the purchasing process. He writes advice for importers on qualityinspection.org.

This article was originally published by Global Sources, March 13, 2014. Global Sources is a leading business-to-business media company that facilitates trade between buyers worldwide and suppliers in China & Asia, via online portals, magazines, research reports and trade fairs.

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