China n Cars!!!

The automobile market in China is expanding at breakneck speed. Factories are churning out cars 24/7 but still unable to meet the Chinese demand. China overtook the U.S. last year as the world’s largest automobile market with sales surging 46 percent to 13.6 million, according to the China Association of Automobile Manufacturers. Nissan, Ford Motor Co. and Honda Motor Co. are running their Chinese factories at full capacity, with overtime and weekend shifts, and still can’t deliver enough cars. Cars are no longer a luxury item, but more of a basic necessity. Although China has made significant investment in infrastructure, more needs to be done to support the booming car market and to aviod huge traffic jams like the one above. Cars have not only affected the domestic landscape they are changing China’s role in the world. Increased resource requirements have led Chinese companies to scour the globe for commodities, no matter the ecological costs. Two weeks ago, for instance, a Chinese company bought a $4.6 billion stake in Alberta’s Tar Sands, which is among the world’s dirtiest sources of oil.
Until the mid-1990s China was oil self-sufficient, a position that has changed dramatically. China is now the number two consumer of oil worldwide and the country has been responsible for a great deal of the world’s total oil growth in recent years. With less than two percent of the world’s oil reserves, most of its growing needs will be imported. Fifteen years ago automobiles in China guzzled about 10 percent of the country’s much smaller total oil usage. Today cars and light trucks consume about forty percent of all China’s oil. So long as the country continues along the North American ‘development’ path, there’s no reason to believe that cars won’t someday consume half of the country’s oil. The ecological consequences will become increasingly severe. Is this really the development we need?

Is China's Economy Overheating?

China's gross domestic product grew at a rate of 11.9% in the first quarter of 2010, compared to the same period a year before. HSBC predicts that the China's GDP would grow by a 11% this year.
Thats a bit too fast going by even's China's standard. The massive govt stimulus has sparked a rise in inflation. There is a property bubble building up in the real estate market. The prices in the housing market have risen by 11% compared to last year. Several economists are predicting a bubble burst soon. I hope China learns from the mistake of US and reins in the prices, otherwise the mortgage crises in China would be inevitable.

Stock Markets tumble!!!

The world stared fear in its eyes yesterday. The stock markets went on a one-day steep fall starting with Asia followed on by Europe and finally hitting home in the US.



Dow Jones Industrial Average fell 3.58% to close below psychological 10,000 level at 9955. The Straits Times Index (STI) declined 5.6% to 2168, which was not seen since June 2005 (more than three years ago).



The various stock indices had fallen sharply losing between 58.7% to 25.8% from January this year.



6 Oct 08 2 Jan 08 Change (%)

Dow Jones (USA) 9955 13043 - 23.6

S&P 500 (USA) 1056 1447 - 27.0

FTSE100 (UK) 4589 6416 - 28.4

Germany DAX 5387 7949 - 32.2

Paris CAC40 3711 5550 - 33.1

Nikkei 225 (Japan) 10473 14691 - 28.7

Shanghai Composite 2173 5272 - 58.7

Hang Seng (HK) 16803 27560 - 39.0

Mumbai BSESN 11801 20465 - 42.3

Australia All Ord 4540 6434 - 29.4

New Zealand NZX50 2990 4033 - 25.8

STI (Singapore) 2168 3461 - 37.3



The credit crisis has moved on from US to affect the European financial institutions.



The fear now is that the world economies will slow significantly resulting from this financial crisis. It is a case of loss of confidence by investors after watching their investment portfolios dwindling in values by the days. They are cutting back on consumer expenditure hence hurting the economies in the process.



It is tempting to go into the stock market and buy shares of companies which have come off from their peaks and plumping new depths. The reality is when one buys into a stock and no sooner the share finds another new low.



The advices from most analysts have been that this is not the lowest level yet. It may still drop further and it may take six months to a full year in order to see a clearer trend for the stock market.

BRIC theory is profoundly flawed?

The other day I had a very interesting discussion about BRICs with my friend. He was of the opinion that still a lot has to done to challenge the might of the US - and basically BRICs was a flawed theory . Here is a summary of the discussion.

For the starters BRICs theory was first introduced by Jim O’Neill, managing director of Goldman Sachs (investment bank) in 2003. The four BRIC countries are, Brazil, Russia, India and China. The Goldman Sach’s thesis contemplated that the economies of the BRICs are rapidly developing and by 2050 will eclipse most of the current richest countries of the world. This theory appears to be more of a wishful thinking rather than a hard-headed economic analysis. I do not see the fundamentals existing in any of the four mentioned economies, for a sustained economic expansion. These are certainly a group of exciting possibilities, besides Mexico, South Africa, South Korea, Vietnam and others. It is important to measure all these countries against some basic conditions and parameters. There are a lot of essential elements that made the Western World rich and powerful.

The first condition is a stable political environment. There can not be any long-term political stability without the consent of the governed. This consent must be reaffirmed periodically, not later than 4-6 years. When a government looses the confidence of the governed, there must be a peaceful transfer of power as and when necessary. A single party in power breeds corruption, cronyism and stalemate, no matter how well intentioned. No country in the world has sustained growth and prosperity over long periods of time, without a political consensus. How many of the BRIC countries would qualify in this test?

The second and probably the most important condition is the ‘Rule of Law’. Every country must have a written ‘Constitution’, giving equal protection to all it’s citizens under all circumstances. There must be an independent Judiciary, capable of interpreting the laws and providing justice to all including the foreigners and international agreements. The government must be accountable to the Courts and Justices. The Executive and the Legislator must stand by the law of the land. Without the rule of law and the transparency of justice, long term trade and agreements can not be sustained. Where do BRIC countries stand on this - particularly INDIA?

Another important condition for the ‘Emerging Economies’, is the development of Intellectual Infrastructure. We are not just talking about basic educational institutions, we are talking about the world-class universities and research laboratories. How many countries around the world have centers of excellence like Stanford, Harvard, MIT (Massachusetts Institute of Technology), Cambridge and Oxford? How many countries produce innovators like Bill Gates, Steve Jobs, Jerry Yang, Larry Page and Sergey Brin? Surely we do have Ratan Tata, Narayan Murthy, but they very few in number.Would Brazil, Russia, India and China, encourage students from around the world to come to their Universities and do research, find jobs, raise families and then become full citizens of their countries?

Immigration has been the foundation of an idea called “America”. The United States of America was founded by immigrants. Few would know that even their ‘Revolutionary War’ for independence was fought by Irish immigrants who were not even born in America. Hundreds of thousands of people come to The United States every year and over time become permanent residents and finally citizens of this country. It is the genius of these immigrants, that has fired the imagination of the US. Immigrants have rejuvenated the creative instincts of this ‘Economic Power House’. If BRIC countries and others around the world aspire to be the great powers of the 21st Century, they would have to learn to live with others, in peace and harmony.