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Monday, 17 November 2014

Hendren Global Group Top Facts: US-China Trade Deals in APEC Summit

Asia-Pacific Economic Cooperation (APEC) summit in China last week was eagerly watched by the world, and not just by those with business interests.

Apparently, a summit as formal as APEC can now be a source of amusement for the rest of us who can hardly understand economic jargon.

Hosted by Beijing, the 3-day event was attended by the leaders of top countries such as Japan, US, Russia, Singapore, South Korea and Australia. Out of this year's summit came a number of jokes poking fun at world leaders no less. There's the Shawlgate (Vladimir Putin's chivalrous act of draping a shawl over the shoulder of Xi Jinping's wife), the gum-chewing of Barack Obama and of course those 'Star Trek' uniforms (we've heard they're actually traditional Chinese tunics but the rest of the world decided they are all cosplaying Trekkies ).

On a more serious note, China backed  a free-trade deal for the Asia-Pacific region -- something that is anticipated to  put her at the forefront of regional commerce.

The regional deal named the Free Trade Area of the Asia Pacific (FTAAP) was originally from an APEC business panel, but despite prior comments from various leaders that this proposal could be a distraction, China still put it as a main agenda of the meeting -- marking the  first time it has led such an initiative.

The delegates in turn issued an official statement agreeing to launch a committee that will conduct a  2-year study of the proposal.

China's Xi Jinping said, "This is a historic step in the direction of an Asia-Pacific free trade area." He added that APEC nations must actively promote this pact and "turn the vision into reality as soon as possible".

Hendren Global Group Top Facts sees this as counter move to the Trans-Pacific Partnership (TPP), US' own trade agreement with 12 nations, excluding China. The US is advocating the TPP as means to reroute commerce towards their way, while trying to put pressure to Beijing to conform to their trade practices. Obama himself believes that there's a momentum building in favor of TPP's completion.

It seems like an instrument to put China aside and weaken its economic condition, noted Hendren Global Group Top Facts. China's move to promote its own trade deal can perhaps lead to a new and stronger status in the region. It  may say its motives does not include hurting the US but as the biggest trading partner a country can have in the region, it will inevitably chip away US influence.

Trade officials from the US are downplaying its supposed adverse effect to their country, saying that the two deals are not really competitors.

Obama does not seem to be worried as he  iterates that the US "welcomes the rise of a prosperous, peaceful and stable China".

"We want China to do well," he added.

Sunday, 2 November 2014

Hendren Global Group Top Facts on Asia’s Contribution to the Global Economy: Is playing Catch-Up Good?

According to the news from The Economist, entitled “Economic Convergence: Economic Headwinds Return”, “Ten years ago, developing economies were catching up with developed ones remarkably quickly. It was an aberration.”

Reviewing the decade-and-a-half journey of China from a lagging economy to one that has surpassed many nations in Europe in terms of average income generation, the article describes the dire realities that beset the once sleeping-giant-turned-global-power. Using Hong Kong as the standard by which to measure economic growth, average incomes dip to 50% in Shenzhen, to 25% in Guandong and to a mere 10% in Yunnan. That is an overall average of less than 30% that of Hong Kong, which is essentially a small dot of an island compared to the gigantic mainland China teeming with so many millions of people.

The average annual rate of growth from 2000 to 2009 for developing nations was 7.6%, 4.5% higher than that seen in developed rich nations. That unprecedented rate practically narrowed down the gap between the developed and developing countries.

The once deprived populations of the world, a big majority of whom are found in Asia and living on less than the global poverty level of $1.25 daily income, surged on from a share of 30% of the world population in 2000 to less than 10% as of April 2014, according to the Center for Global Development based on new date from the World Bank. At that pace, it is estimated that in only 30 years, the average income per person would converge with that in America. This is certainly cause for great hope for many people on a global scale.

Sad to say, those hopes are now slipping away. An evaluation of data on GDP per person based on new computations of cost of living released in April by the World Bank’s International Comparison Programme (ICP) seems to show that convergence has slowed down drastically.

Since 2008, growth rates across the emerging nations have slowed down and matched those in developed economies. When the new ICP figures are applied, the average GDP per capita in the emerging world, measured on a purchasing-power-parity (PPP) basis, grew just 2.6 percentage points faster than American GDP in 2013. If China is removed from the estimates, the difference is only 1.1%. At that rate, convergence with rich-economy incomes will occur in a hundred years or more, longer than a generation. If China is included, emerging economies could expect to reach rich-world income levels, on average, in a little over half-a-century.

Japan, which achieved industrialization in the first part of the 20th century, grew to be the world’s second largest economy, next to USA. South Korea, Taiwan and several city-states like Singapore and Hong Kong also grew and developed into prosperous nations. The rush to achieve levels of growth close to those of developing nations became an addiction to these nations and others who needed to catch up as well. The price paid in terms of investments on human capital led to social and political problems as some nations had to export their workers to the industrialized or more prosperous nations. Ironically, the income generated by those workers help to sustain those nations during the crises that transpired.

In trying to explain the growth disparity, economists pointed to institutions being the key while others focused on “geography and climate”. Moreover, they said that “remoteness from economic centers and hot, disease-prone conditions could retard development,” which is the case in many of the Southeast Asian countries where the issues of rebellion and ethnic differences provide obstacles to development of the depressed country-sides.