(Business) China: Tapering off?

China have long been tipped to overtake the United States as world’s largest economy and premier superpower however of late China has experienced a notable slowdown underlined by the unexpected growth shown by the Philippines as the nation beat into second achieving 7.8 per cent growth to china’s 7.7 in the first quarter[1] . 

This compounds a less than fantastic week for the country as yesterday the IMF reduced it forecast for china’s pointing to the slowdown in exports[2]. While this may appear to represent not much in the way of decline, a trend is clearly developing as while China is at a solid  7.7 percent, it was 7.8 just a year ago which was “its slowest rate for 13 years”[3].

While China’s current slowdown owes largely to the current state of the global economy, China has experienced a slump in its manufacturing, which has been at the heart of China growth over the last three decades as “factory activity had contracted for the first time in seven months”[4].

However while its economy has experienced a slight decline, its growth is still strong in comparison counterparts in the west however China, if not careful, could end up making the mistake many nations, especially in the west, have made in failing to deal a job market  that at once cannot match its demand and favours experience over youth.

China has not escaped the global macro trend of the world becoming no place for young men and women looking to succeed and support themselves as it job market has slowed. Reuters’ Didi Tang chronicles the struggle of chemistry graduate Jiang Wenying who may have consider other options having “sent out more than 1,000 job applications, netting no more than 10 interviews and not a single job offer”[5]. This can only be bad news for China down the road as Jiang is one of the nearly seven million graduates who “are leaving universities and graduate schools to seek their first job” only to find that it may not exist[6].

This trend can have real political implications as it has in numerous countries who have paid no attention to creating a job market that’s friendly to the young as many of the graduates are the sons and daughters of China growing urban middle class which have started to find its voice.

In sum, China may end up becoming the world’s biggest economy as its rate of growth has been one of the highest in the world for two decades straight but as faces a number of problems owing to the state of the global economy and number of problems with labour policy and job market which could have political as well as economic implications, it may have to wait a little bit longer.  

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[1] K.Lema, 2013, Philippines’ surprisingly strong first-quarter growth eclipses China, http://www.reuters.com/article/2013/05/30/us-philippines-economy-gdp-idUSBRE94T06E20130530

[2] BBC News, 2013, China’s growth forecast cut by IMF,

http://www.bbc.co.uk/news/business-22700546

[3] Ibid

[4] Ibid

[5] D.Tang, 2013, China’s biggest graduating class enters what looks to be tightest job market as growth slows, http://www.therecord.com/news/business/article/941611--china-s-biggest-graduating-class-enters-what-looks-to-be-tightest-job-market-as-growth-slows

[6] Ibid

(Business) Tesco: dark moons in the west, silver linings in the east?

It hasn’t been the best of times for Tesco in recent months as its US venture Fresh & Easy has fallen flat to the point that the Retail giant is considering cutting their losses by either selling up to its immediate competitors or effectively “break-up…the business”[1]. The sell-off has already started with Tesco selling “Fresh & Easy refrigeration units” and looking for buyers for “220 East Coast stores and a distribution centre (which) could be attractive to property developers”[2].

However Tesco’s woes in the US bear no comparison to their fate of late in their bread and butter domestic market. The horsemeat scandal which Gripped Britain last month outraged consumer and the public in general with Tesco taking front and centre for most of the flak.  

The PR nightmare began when Tesco, to their embarrassment, had to pull a number of their own brand meat products as they were found to have traces of horsemeat[3]. Tesco took the biggest hit in the aftermath of the scandal as it saw its market share take a tumble as it fell “below 30%-a level it fell below eight year ago…”[4]. Its rivals saw a boost in sales with Sainsbury’s, unblemished by the horsemeat debacle, were the chief beneficiaries of Tesco’s misfortune reporting a notable increase in sales[5].

However Tesco’s domestic troubles have been in the making long before the horsemeat scandal stole headlines as Tesco profits in the UK, while substantial, experienced a drop and have been outperformed by other markets, notably by the retail giants’ Asia and banking operations[6].  

Seeing that Tesco may have reached its highest rate of profit in the UK, its leadership looks to continue its impressive growth in Asia by expanding its already impressive online operation to cover its rapidly growing Asian demand with the company being able to “launch in 50 cities across China” however, the retailer remains cautious[7]. Subject to an successful dry run in Shanghai, Tesco may expand its operation in China as it tries to negotiate the niggling act that China is still largely a cash economy[8].

In sum, Tesco have not had the best of times in the last few months but with plans to expand their operations in Asia in the near future, it could make for a fruitful future.     

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[1] G.Ruddick, 2013, Tesco explores options doe Fresh & Easy exit, http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9960166/Tesco-explores-options-for-Fresh-and-Easy-exit.html

[2] Ibid

[3] S.Neville, 2013, Tesco withdraws own-brand value meatloaf after finding horse DNA, http://www.guardian.co.uk/uk/2013/mar/12/tesco-horse-dna-meatloaf-withdrawn

[4] Tesco Market Share sticks below 30% after horsemeat revelations, http://www.guardian.co.uk/business/2013/mar/26/tesco-market-share-horsemeat-revelations

[5] Ibid

[6] Tesco PLC, 2012, Annual Report and Financial Statements 2012,   http://www.tescoplc.com/files/pdf/reports/tesco_annual_report_2012.pdf

[7] G. Ruddick, 2013, Tesco considers major online expansion in China, http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9952231/Tesco-considers-major-online-expansion-in-China.html

[8] Ibid

(Politics) China Military and Energy Spending: A Cause for Concern?

Much has been made of China apparent rise and the factors, consequences and potential outcomes possible attached to its growth, but so far, much of it has been negative and with the rate that China is expanding it’s military capabilities and importing oil, pessimists towards China’s growth as a international player have a solid argument as to why the glass is half empty.

While China may be in a region where it is next door neighbor is a nuclear police state in North Korea and is less than pally with it’s even less than favorite neighbor in Japan, It safe to say that China are increasing their military prowess at a alarming pace with its navy “now second in size only to the US in terms of raw numbers”[1].  This is possible thanks to massive spikes in China’s defense budget with it’s leadership revealing a massive 11.2 percent boost in 2012 alone following “a long term trend of double digit percentage increases in annual spending” [2].

While it might not entirely clear just how much China is spending to build up its military power, according to Pentagon estimates, Security has no price in Bejing as spending could be “between $120 billion and $180 billion”[3]. While China massive defense spending hikes would send a shiver down any  neighboring nation's spine, China’s less than cordial behavior towards it’s  neighbors  does nothing to ease the real fears of how China will act when it completes it’s ascent to become the world’s foremost superpower.

China has been super assertive towards it’s neighbours, particularly Japan, over small disputed islands  which both sides claim to be theirs to the point that both sides have already named the island as China has named lands (currently in dispute with Japan) in the East China Sea ‘Diaoyu’ while Japan refer to the lands as ‘Senkaku’[4]. China, none to shy asserting itself, has land disputes with regional neighbours “Philippines and Vietnam, as well as Taiwan, Brunei and Malaysia, over territory in the South China Sea”[5]

While you may now be thinking why China would kick up such a fuss in its region over  minuscule islands you would struggle to locate with Google Earth ,  the fact that the islands are, wait for it, “resource-rich” may ease your  search for an answer. China are also trying out it’s naval power in the form of “patrols and exercises” in these “contested waters” because China will eventually seek to make the islands theirs and there will be little it’s neighbours can do about it.

The news of China surpassing Uncle Sam in oil imports may have come as a shock to most due to the US’s well documented reliance on middle east oil and the even better documented foreign policy implications of relying on oil from the Middle East, but it shouldn’t have to a shock to anybody.

China has a big oil demand due to it’s population size and a slowed but still growing economy but maybe  the  concern of China becoming the world’s foremost buyer of oil was over the historical  need for oil for nations to fight sustained wars. While there is no indication that China is looking for a military confrontation with anybody, when a nation buys oil at a rate China is, the political classes of all countries involved watch closely with trepidation as there is only two real reasons for such an influx, a growing economy with a big oil demand or the preparation and possible execution of sustained military campaign.

China’s oil buying, defence spending and it’s new assertiveness in the region has a number of nations spooked, especially Japan.  Japan uneasiness over China’s growth as a military threat had made Japan increase  it’s own defence budget increase (it’s first in over a decade) by a meagre (in comparison to China’s at least) 0.8 percent and its “coast guard budget” by 1.9 percent “ in response to  China’s “incursions”[6]. It might have been more but Japan are in no position to assert itself against China as Japan is hamstrung by it inability to “service  record debt “ and a “decades old informal military spending limit of 1 percent of gross domestic product”[7].

China’s other neighbour, India are also less than comfortable with it’s  rise signalled  by it’s recent nuclear show of force and an increase of its defence budget to the tune of  $37.7 billion[8] . Both India and Japan have sought to establish stronger ties with each other with Japan  being “the largest donor of official development aid to India” [9].

Both nations, encouraged by the US especially and more importantly, have been long looking to contain the rise of China with a conspicuous increase in trade between the countries as trade between India and Japan was only $6.5 billion in 2005 but jumped to $18.5 billion just six years later[10]. However, all this minor positioning and balancing on the part of China’s regional rivals is the work of  the United States, who see China as a threat to it’s previously unparalleled global dominance.

In Sum, China rise in military and economic might was always going to scare neighbours and concern rival but the pace over the thirty has been phenomenal  and now we are only now starting to see how the world responds to what now looks like  China are looking to assert themselves more as nation of their size and stature has, and as China’s political leadership might argue, should.

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[1] D. Lague and T.Y. Jones, 2013, China Defence spending seen rising as territorial rows deepen,  http://www.reuters.com/article/2013/03/01/us-china-defence-idUSBRE9200HH20130301

[2] Ibid

[3] Ibid

[4] Ibid

[5] Ibid

[6] I. Reynolds, 2013, Japan Defense Budget to Increase for First Time in 11 Years, http://www.bloomberg.com/news/2013-01-29/japan-s-defense-spending-to-increase-for-first-time-in-11-years.html

[7] Ibid

[8] S. Choudhury, 2013, India Increase Defense Budget to $37.7 billion, http://online.wsj.com/article/SB10001424127887324662404578331762186925312.html

[9] T. Kitazume, 2013, Japan urged to help build India’s Infrastructure,                                                                               

[10] Ibid