Monday, November 20, 2017

Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN




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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.



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China-ASEAN Wage Comparisons and the 70 Percent Production Capacity Benchmark

Op-Ed Commentary: Chris Devonshire-Ellis

As wage increases in China continue to rise – along with the comparatively high national welfare costs – increasing comment is being made as to the legitimacy of the “China Plus One” scenario. Coined some years ago, this theory – in reality, more of a shrewd observation – suggests that future manufacturing capacity will be placed both in China and externally in another location by the same manufacturer.

In fact, this has been going on for years, most notably between China and Vietnam. The recent anti-Chinese riots there have even prompted Hong Kong Shippers’ Council chairman Willy Lin Sun-mo to state that Hong Kong manufacturers based in the Pearl River Delta are running out of alternative, low-cost factory locations with ample labour following recent instability in their two preferred destinations, Vietnam and Thailand. I wrote about the Vietnam and Thai issues – along with a risk analysis for doing business in the rest of Asia – and China, earlier this week here, in this article “Anti-China Vietnam Riots a Passing Phase,” and Willy Lin’s comments can also be construed as a mild political point to Beijing that placing oil rigs in disputed waters hurts Hong Kong manufacturers. Continue reading

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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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India Sets General Election Date as Political Tide Shifts

India’s electorate may choose to break its historical tendency to vote according to religious and caste affiliations as the BJP, AAP and Third Front seek broader appeal with messages of good governance, economic development and anti-corruption.

By Shawn Greene

India's election season will be an exciting time for foreign investors.DELHI – India’s Election Commission has announced the dates for this year’s highly anticipated general election, which will be held in nine phases in April and May.

Polling for the 16th Lok Sabha (lower house of Parliament) will begin April 7 and conclude May 12. Votes will be counted on May 16, and the new Parliament must be constituted by May 31. Continue reading

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The 2014 Asian Stir-Fried Prawn Index

Op-Ed Commentary: Chris Devonshire-Ellis

Jan. 22 – When it comes to making comparisons across Asia, and especially the various regional economies, a difficulty is in choosing a commodity familiar to all within this massive region. Typically, housing prices, cost of labor and even mobile phone penetration or the famous Mars Bar Index are used to demonstrate how economies and regional prices vary against the same product. Having given this some thought, while trying to maintain an Asian flavor in our 2014 comparison, we decided to choose a dish prevalent across Asia – Stir-Fried Prawns. It is perhaps the one dish that can be found from Northern China to Southern India, and all points in-between, and is therefore a reasonable barometer to try and ascertain how Asian consumers differ in their local costs of consuming what to hundreds of millions of people is either a tasty lunch or dinner dish. Continue reading

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ASEAN’s Demographic Dividend

By Shawn Greene

Nov. 26 – More than 30 years after Deng Xiaoping first introduced China’s famous “one-child” policy, President Xi Jinping’s government appears set to finally relax the country’s approach to family planning. Announcing this month that many urban couples will soon be permitted to have two children under broader exemptions to the “one-child” rule, the government’s policy shift comes amidst concerns that the country’s low fertility rate and rapidly ageing population may threaten its long-term social and economic stability. Continue reading

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An Unseen Revolution in Indian Manufacturing?

Indian manufacturing’s share of GDP has been stagnating. Some of the industry’s problems stem from a business culture of hierarchy and bureaucracy. But competitive pressure is forcing a transformation, and the new management models now being adopted can change how investors and customers perceive Indian companies

By George Wyeth

As China turned itself into the manufacturing centre of the world over the past decade, many expected India to follow – but it never happened. The Indian economy did take off, but largely in services such as software development. For years, manufacturing’s share of GDP has been flat at 15-16%, and has actually declined slightly in recent years. Now, with the economy in trouble, manufacturing output is stagnating.

Many of the factors usually blamed for this are beyond the manufacturers’ control. Infrastructure is still weak. Financing is difficult to get, with high inflation driving up interest rates and bankers becoming risk averse. Labour laws make it extremely difficult to lay off employees; this discourages investment by global businesses, which are able to locate elsewhere. Energy is expensive and unreliable. Continue reading

Posted in Business, Featured | 3 Comments




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