tag:blogger.com,1999:blog-90319259212186767042024-03-16T01:11:33.810+00:00International Political Economy ZoneAttitudes of elegant despair on subprime globalizationEmmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comBlogger3631125tag:blogger.com,1999:blog-9031925921218676704.post-90077816120917817232023-11-06T14:04:00.006+00:002023-11-06T14:16:42.184+00:00Fleeing China II: Foreign Divestment Edition <p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCWwPW9lOcBjxaiPCiTQ20N3IbnL5hlNBHO5gcSKA4IOzpjkPqsBAuLMyZyeOFw7m85BFGknKb4ipimc-a3YeW9elUh8mSMQSw5l9boyGjXZ4CCFx_rpLTs7udX31VGWMfsUMZcUHf3WvDV5Vh4qXCqBiNbO-RGaCjyKcUbo_qe65maNf6bIEaG_LcPpQ/s1021/ChinaBiz.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="681" data-original-width="1021" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCWwPW9lOcBjxaiPCiTQ20N3IbnL5hlNBHO5gcSKA4IOzpjkPqsBAuLMyZyeOFw7m85BFGknKb4ipimc-a3YeW9elUh8mSMQSw5l9boyGjXZ4CCFx_rpLTs7udX31VGWMfsUMZcUHf3WvDV5Vh4qXCqBiNbO-RGaCjyKcUbo_qe65maNf6bIEaG_LcPpQ/w640-h426/ChinaBiz.jpg" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Bing prompt: "Draw a businessman leaving China".<br /></td></tr></tbody></table><p></p><p>Hot on the heels of the previous <a href="http://ipezone.blogspot.com/2023/10/chinese-migrants-at-us-border-prcs-dire.html">post</a> about how Chinese are showing at the United States' southern border seeking asylum from increasingly dire economic conditions in the PRC, we get more news of this sort. Just as people are leaving China, so is capital: For the first time its records, the PRC has seen a net <i>outflow</i> of Foreign Direct Investment (FDI). On balance, more FDI is leaving than entering China, once the world's most notable destination for investment. From the <a href="https://asia.nikkei.com/Economy/Foreign-investment-in-China-turns-negative-for-first-time"><i>Nikkei Asia Review</i></a>: </p><p></p><blockquote><p>Outflows of foreign direct investment in China have exceeded inflows
for the first time as tensions with the U.S. over semiconductor
technology and concerns about increased anti-spying activity heighten
risks. The shift was reflected in balance-of-payments data for the
July-September quarter released Friday by the State Administration of
Foreign Exchange.</p><p>FDI came to minus $11.8 billion, with more
withdrawals and downsizing than new investments for factory construction
and other purposes. This marked the first negative figure in data going
back to 1998.</p></blockquote><p></p><p>To be sure, there are overseas precursors for this shift. The US is keen on banning cutting-edge knowledge on semiconductors and artificial intelligence from leaking to China:</p><p></p><blockquote><p>Escalating tensions with the U.S. are one reason for the decline in
foreign investment. In a survey taken last fall by the American Chamber
of Commerce in the People's Republic of China, 66% of member respondents
cited rising bilateral tensions as a business challenge in China. </p><p>In August, the U.S. announced tighter restrictions on chip
and artificial intelligence investment in China. Washington is
coordinating with Beijing ahead of a summit meeting between Presidents
Joe Biden and Xi Jinping in November, but the U.S. remains committed to
technology restrictions in the name of economic security.</p><p>Looking
at foreign investment in the semiconductor field by destination, China's
share has already shrunk from 48% in 2018 to 1% in 2022, according to
U.S. research firm Rhodium Group. In contrast, the U.S. share rose from zero to 37%. The combined share of India, Singapore and Malaysia grew from 10% to 38%.</p></blockquote><p></p><p>However, American chip and AI concerns obviously do not make up <i>all</i> potential sources of FDI to China. It is here where a decidedly unfriendly foreign investment policy climate factors in. You name it: from <a href="https://www.cnbc.com/2023/06/21/inside-chinas-spy-war-on-american-corporations.html">corporate espionage</a> to <a href="https://www.reuters.com/business/raids-exit-bans-us-companies-face-growing-hurdles-china-2023-08-29/">various forms of harassment</a> of overseas businesses under dubious pretenses... today's PRC leadership does not think much of how others perceive these actions meant to promote domestic industry at the expense of foreign concerns. <br /></p><p>Europeans, for instance, cite only <a href="https://edition.cnn.com/2023/11/06/economy/china-negative-fdi-challenges-hnk-intl/index.html">cosmetic</a> efforts to improve prospects for FDI:</p><p class="paragraph inline-placeholder" data-analytics-observe="off" data-article-gutter="true" data-component-name="paragraph" data-editable="text" data-uri="cms.cnn.com/_components/paragraph/instances/clomcwx77000b3b6hcjlxmr8x@published"></p><blockquote><p class="paragraph inline-placeholder" data-analytics-observe="off" data-article-gutter="true" data-component-name="paragraph" data-editable="text" data-uri="cms.cnn.com/_components/paragraph/instances/clomcwx77000b3b6hcjlxmr8x@published">Beijing has been seeking to reverse capital outflows in the face of <a href="https://www.cnn.com/2023/08/21/economy/china-economy-troubles-intl-hnk/index.html">mounting economic challenges.</a> But such efforts appear to have failed to assure investors. The China International Import Expo (CIIE), an annual event
launched by President Xi Jinping in 2018 to portray China as an open
market and improve its trade ties, kicked off on Sunday. But the European Union Chamber of Commerce in China criticized the event last week as a “showcase.”
</p>
<p class="paragraph inline-placeholder" data-analytics-observe="off" data-article-gutter="true" data-component-name="paragraph" data-editable="text" data-uri="cms.cnn.com/_components/paragraph/instances/clomiac6800073b6h9e2sejr7@published">
“European businesses are becoming disillusioned as symbolic
gestures take the place of tangible results needed to restore business
confidence,” the chamber said in a Friday statement. “The CIIE was originally intended as a showcase of China’s opening
up and reform agenda, but it has proven to be largely smoke and mirrors
so far,” Carlo D’Andrea, vice president of the chamber, said in the
statement. <br /></p></blockquote><p>Having done nearly everything possible to discourage FDI, is it any wonder it's leaving China?<br /></p><p></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-76825289150978448382023-10-30T14:00:00.006+00:002023-10-31T13:29:00.518+00:00Chinese Migrants at US Border: PRC's Dire Straits<div class="separator"><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWUSNLuCiIBx3YmRMY5qAa3YUVSvjRYgb7Pzu9cf-xotVrJH5ry6VKA3uzJdXxtYfAa5zJ8Yj88mY_Ff6ywyPWOQgRvqbQcFc2LNsRGpC97CIYrDeMhXrGPYTv6CDHaGgae5Geb9SH5Z8TGfKp1mS7fUwfJdcHyZMsf2lMcYn_HMsW-Bz9imwq_Blb5F0/s1019/bp.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="652" data-original-width="1019" height="410" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWUSNLuCiIBx3YmRMY5qAa3YUVSvjRYgb7Pzu9cf-xotVrJH5ry6VKA3uzJdXxtYfAa5zJ8Yj88mY_Ff6ywyPWOQgRvqbQcFc2LNsRGpC97CIYrDeMhXrGPYTv6CDHaGgae5Geb9SH5Z8TGfKp1mS7fUwfJdcHyZMsf2lMcYn_HMsW-Bz9imwq_Blb5F0/w640-h410/bp.jpg" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The blog's first AI image c/o Bing: "Draw a Chinese person walking through a Panamanian jungle."<br /></td></tr></tbody></table> </div><div class="separator">A usually good indicator of an underwhelming economy is of a country's citizens departing it for greener pastures. The year is 2023, not <a href="https://www.britannica.com/topic/Chinese-Exclusion-Act">1882</a> when the US passed the Chinese Exclusion Act to stop a massive influx of Chinese immigrants. Moreover, isn't the 21st century supposed to have been the Asian Century according to some prognosticators? My belief is that policy missteps by Xi Jinping have greatly dented the forward momentum of China in recent decades, recently exacerbated by endless lockdowns during the COVID-19 pandemic. At any rate, you may be surprised that the PRC--not some Latin American country--now ranks fourth in sending folks across the Darién Gap linking South and Central America with hopes of entering the United States. From the <a href="https://time.com/6329762/chinese-migrants-us-border-asylum/"><i>Associated Press</i></a>: <br /></div><p></p><blockquote><p>Chinese
people were the fourth-highest nationality, after Venezuelans,
Ecuadorians, and Haitians, crossing the Darién Gap during the first nine
months of this year, according to Panamanian immigration authorities. Chinese
asylum-seekers who spoke to The Associated Press, as well as observers,
say they are seeking to escape an increasingly repressive political
climate and bleak economic prospects.</p><div class="native-ad flex w-full flex-col items-center justify-center"><div aria-label="Advertisement" class="ad flex min-h-[1px] w-full min-w-[1px] max-w-[100vw] items-center justify-center overflow-hidden bg-transparent text-center group-[.disable-ads]:hidden print:hidden flex" data-native="false" id="native-ad-inline-1" role="complementary"></div></div><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">They
also reflect a broader presence of migrants at the U.S.-Mexico border —
Asians, South Americans, and Africans — who made September the
second-highest month of illegal crossings and the U.S. government’s 2023
budget year the second-highest on record.</p></blockquote><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"></p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">As bad as things may be Stateside, let's say they are decidedly worse in China (where you certainly aren't free in a conventional sense). </p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"></p><blockquote><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">The pandemic and China’s COVID-19 policies, which included tight border
controls, temporarily stemmed the exodus that rose dramatically in 2018
when President Xi Jinping amended the constitution to scrap the
presidential term limit. Now emigration has resumed, with <a href="https://time.com/6314365/china-economy-russia-ukraine-war/">China’s economy struggling to rebound</a> and <a href="https://time.com/6304881/china-stops-publishing-youth-unemployment-statistics/">youth unemployment high</a>. The United Nations has projected China will lose 310,000 people through emigration this year, compared with 120,000 in 2012...</p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">“This
wave of emigration reflects despair toward China,” Cai Xia,
editor-in-chief of the online commentary site of Yibao and a former
professor at the Central Party School of the Chinese Communist Party in
Beijing.</p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">“They’ve
lost hope for the future of the country,” said Cai, who now lives in
the U.S. “You see among them the educated and the uneducated,
white-collar workers, as well as small business owners, and those from
well-off families.”</p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">Those
who can’t get a visa are finding other ways to flee the world’s most
populous nation. Many are showing up at the U.S.-Mexico border to seek
asylum. The Border Patrol made 22,187 arrests of Chinese for crossing
the border illegally from Mexico from January through September, nearly
13 times the same period in 2022. Arrests peaked at 4,010 in September,
up 70% from August. The vast majority were single adults.</p></blockquote><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"></p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">A common route involves landing in Ecuador and then continuing northward to reach the border: <br /></p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"></p><blockquote><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">The
popular route to the U.S. is through Ecuador, which has no visa
requirements for Chinese nationals. Migrants from China join Latin
Americans there to trek north through the once-impenetrable Darién and
across several Central American countries before reaching the U.S.
border. The journey is well-known enough it has its own name in Chinese:
walk the line, or “zouxian.”</p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"> The monthly number of Chinese migrants crossing the Darién has been
rising gradually, from 913 in January to 2,588 in September. For the
first nine months of this year, Panamanian immigration authorities
registered 15,567 Chinese citizens crossing the Darién. By comparison,
2,005 Chinese people trekked through the rainforest in 2022, and just
376 in total from 2010 to 2021.</p></blockquote><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px"></p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">If there is something that will shame the PRC into adopting sensible economic policies that benefit its general population, then its citizens fleeing China for distant America <i>en masse</i> during its supposed renaissance should be it. In the final analysis, the folks who've made China <a href="https://www.washingtonpost.com/business/energy/2023/05/12/explainer-why-it-s-hard-for-china-to-shake-the-uninvestable-tag/2979d178-f128-11ed-b67d-a219ec5dfd30_story.html">uninvestable</a> are the PRC's leaders and not some malign foreign influence these leaders like to blame. </p><p class="self-baseline px-0 font-pt-serif text-17px leading-7 tracking-0.5px">The fruits of Xi Jinpingism are plain to see at the US-Mexico border. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-61604209682644524122023-06-06T11:43:00.008+01:002023-06-08T02:41:44.093+01:00Germans Brand Thee, USA, an ESG Disaster<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><img alt="" height="300" src="https://www.healthdata.org/sites/default/files/files/ActingOnData/2021/firearm_Page_1.png" style="margin-left: auto; margin-right: auto; width: 100%;" width="400" /></td></tr><tr><td class="tr-caption" style="text-align: center;">Just one flagrant American ESG violation among countless others.<br /></td></tr></tbody></table><p>This news story from <i>Bloomberg</i> had me laffing so hard it hurt: Despite the action being rather novel--<a href="https://finance.yahoo.com/news/us-treasuries-blacklisted-german-state-040020762.html">banning investment</a> in US Treasuries over environmental, social and governance [ESG] grounds--it is undoubtedly true that America is an ESG disaster. Offhand, we can cite endless ESG offenses that the US has perpetuated on its citizens and the rest of the world. Among others:</p><ul><li>Environmental: Being the world's second-largest carbon emitter and, historically speaking, <a href="https://www.carbonbrief.org/analysis-which-countries-are-historically-responsible-for-climate-change/">by far</a> the world's largest;</li><li>Social: Maintaining a persistent <a href="https://www.brookings.edu/research/long-shadows-the-black-white-gap-in-multigenerational-poverty/">racial underclass</a> of nearly half of blacks who have experienced inter-generational poverty despite accounting for less than 15% of the overall population;</li><li>Governance: Inflicting far more gun deaths annually than <a href="https://www.healthdata.org/acting-data/gun-violence-united-states-outlier">any other country</a> by allowing largely unfettered sale and ownership of military-style weapons. </li></ul><p>Now, it is not news to anyone that the US is a super-polluting, racialized and hyper-violent nation. However, it <i>is</i> news when others like the German state of Baden-Württemberg start calling a spade a spade... and put their money where their mouth is at: <br /></p><p></p><blockquote><p>That’s because the new environmental, social and good governance filters
have resulted in US Treasuries ending up on an investing blacklist, due
to America’s failure to ratify a number of treaties in areas including
women’s rights and controversial weapons...</p><p>The bulk of Baden-Württemberg’s exclusions impact its equity and
corporate bond portfolios. The law establishes the United Nations
Sustainable Development Goals, the European Union’s Taxonomy Regulation
and the Paris Agreement on climate change as the basis for future
investment decisions.</p></blockquote><p>Lest you think it's just one German state objecting to America, Inc., there are others:</p><p></p><p></p><blockquote><p>Back in Germany, meanwhile, other states have taken similar steps.
Baden-Württemberg, the only one of Germany’s 16 states with a coalition
government led by the Greens, was inspired by a similar law in the
smaller state of Schleswig-Holstein, where bans apply to US Treasuries
as well as to fossil-fuel companies. And the pension funds of
Brandenburg, Hesse and Germany’s richest state North Rhine-Westphalia
are this year allocating as much as €11 billion to Paris-aligned stock
indexes that exclude ESG laggards alongside Baden-Württemberg. </p></blockquote><p>While I do not doubt the sincerity of these actions, I am not convinced that what international ESG-related treaties a country has ratified should constitute the basis for assigning ESG ratings to sovereign debt. Solability, for instance, has a "Global Sustainable Competitiveness Index" (<a href="https://solability.com/solability/the-global-sustainable-competitiveness-index/sovereign-bonds-sustainability">GSCI</a>) that takes into account a number of indicators similar to conventional bond credit ratings.</p><p>Ah well, I guess it's the thought that counts for these Germans. </p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-6323913900995577102023-05-04T16:35:00.007+01:002023-07-11T21:00:47.211+01:00A Problem of Unstressful US Bank Stress Tests<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs5cTUCpv2IrWrVgO7N2Nt6izRR5PvtMH6rOQxS-U9DynJ-18cF7VXj0fvSZ3M-Hg8cwDRKallRg0j0vxvVxJrmiokOkgB6vDiN2J95EV_eznxp4PzuB73_RRn8Gsj1X3-7HVJT61OVEBGfNtjIViu5kZwgEkU7lfjFlZoo3lD-d2GGeRssjfK9ZF5/s1015/StressTestsUS.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="798" data-original-width="1015" height="504" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs5cTUCpv2IrWrVgO7N2Nt6izRR5PvtMH6rOQxS-U9DynJ-18cF7VXj0fvSZ3M-Hg8cwDRKallRg0j0vxvVxJrmiokOkgB6vDiN2J95EV_eznxp4PzuB73_RRn8Gsj1X3-7HVJT61OVEBGfNtjIViu5kZwgEkU7lfjFlZoo3lD-d2GGeRssjfK9ZF5/w640-h504/StressTestsUS.jpg" width="640" /></a></div> Each day brings news of a distressed US bank about to take leave for the Great Central Bank In the Sky. Aren't US banks supposed to be safer now with the advent of greater macroprudential regulation? A common way to gauge the soundness of banks is through the use of stress tests that simulate how these financial institutions would fare in the wake of financial, well, stress. While Americans <a href="https://www.wsj.com/articles/stress-testing-wouldnt-have-saved-silicon-valley-bank-fomc-federal-reserve-treasury-bank-run-signature-bank-1573ab77">bicker</a> about whether the 2019 <a href="https://www.americanbanker.com/news/fed-exempts-most-regional-banks-from-stress-testing-in-2019">loophole</a> exempting midsize banks holding between $100 to $250 billion in assets from stress testing led to their currently precarious situation, even that may not have saved them.<p></p><p>Comparatively speaking, stress tests conducted Stateside may not be sufficiently rigorous in simulating scenarios that are detrimental to financial sustainability. It is fairly obvious that the higher rates we have these days are causing mismatches between what banks earn and what they must pay out. Oddly, however, recent US stress tests have not involved rising but rather falling interest rates. See the <a href="https://www.piie.com/research/piie-charts/feds-recent-bank-stress-tests-used-scenarios-little-variation-none-examined">illustration</a> above and commentary from the Peterson Institute:</p><p></p><blockquote><p>But it’s not only for 2023 that this feature appears. Indeed, every
severely adverse scenario used by the Fed since 2015 has the 3-month
Treasury bill rate ending up at 0.1 percent. Many historic episodes of
severe economic downturn have indeed been accompanied by low interest
rates, as the Fed used its policy tools to support aggregate demand. But
it is a bit strange that not since 2015 has a stress test involved
rising interest rates.</p>
<p>One of the advantages of stress testing the banks every year is that
their robustness to a variety of contrasting stresses can be assessed.
Just repeating a broadly similar scenario year after year misses the
opportunity to provide supervisors with potentially important
information on vulnerabilities. It can also result in policymakers
assuming that the banks are robust to more types of shock than is really
the case.</p>
<p>Yet pointlessly repeating a broadly similar scenario each year is exactly what the Fed has been doing, as we can show here.</p></blockquote><p></p><p>Have other regulatory authorities been administering stress tests as lax and unrealistic as American ones? Thankfully for the rest of the world, the answer is no. The European Central Bank--and remember that Switzerland is not an ECB member for those thinking of a certain defunct bank--has <a href="https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog221220~c6210e3f0b.en.html">done its homework</a> by simulating interest rate rises just as we are experiencing now:</p><p></p><blockquote>Overall, our [ECB] analysis shows that the euro area banking sector would
remain broadly resilient to a variety of interest rate shocks. That
would hold also under a baseline scenario of an economic slowdown in
2023 with the risk of a shallow recession, such as the scenario included
in the December 2022 Eurosystem staff macroeconomic projections.
Profitability would increase overall, driven by [higher] net interest income.
However, provisions would also increase, reflecting potential
difficulties for borrowers. Results for the overall impact on solvency
remain on average fairly muted with great heterogeneity across banks,
within and across different business models</blockquote><p></p><p>The same hold true for Australian banks. Down under, their stress tests have likewise <a href="https://www.rba.gov.au/publications/fsr/2022/oct/box-d-stress-testing-and-australian-bank-resilience.html">gamed out</a> the implications of higher interest rates:</p><p></p><blockquote><p>Higher inflation and higher interest rates could lead to larger credit losses despite continued, albeit
slower, economic growth. The stress testing model can provide insights into the magnitude of potential
credit losses and how important they could be for the capital positions of large and mid-sized banks. The
model applies two principal stresses to examine the resilience of the banking system to higher inflation
and interest rates:</p>
<ol><li>Higher inflation and higher interest rates on mortgages squeeze households’ real incomes, making
it more difficult to service debt, which could lead to more defaults and larger credit losses for
banks. Similarly, higher input costs and higher interest rates passed onto business loans can make it
more difficult for businesses to service their debts, potentially leading to higher default rates
(see ‘<a href="https://www.rba.gov.au/publications/fsr/2022/oct/household-business-finances-in-australia.html">Chapter 2: Household and Business Finances in Australia</a>’). </li><li>Higher interest rates typically reduce the prices of housing and commercial property that are held as
collateral by banks against their loans, which increases LGDs as well as PDs on loans. </li></ol></blockquote><p>Having conducted these sorts of tests well before 2023, Australian banks look to be on firming footing. <br /></p><p>While we hope that contagion does not spread to the Eurozone and the land down under, it certainly bears questioning why US stress tests did not involve scenarios involving deteriorating financial conditions due to sustained central bank rate rises in the face of persistently elevated inflation. While the subject matter can come across as esoteric, such things do impact Joe Average since taxpayers will ultimately foot the bill for cleaning up the mess caused by unstressful stress tests giving false comfort to financial authorities about the soundness of banks they regulate. </p><p>UPDATE 1: Also see Krishna Guha's <a href="https://www.ft.com/content/d0ca757d-c7fe-48db-8385-bb1c7fba072f">commentary</a> in the FT. He warns that while the ECB did conduct asset side stress tests (e.g., holding low-yielding securities), it did not test how vulnerable Eurozone banks were to depositor flight like what has happened Stateside. That said, European depositors <a href="https://www.spglobal.com/ratings/en/research/articles/230314-european-banks-see-limited-contagion-risk-from-svb-12668847">tend not</a> to move their money around.</p><p>UPDATE 2: Former Federal Deposit Insurance Corporation chief Sheila Bair says the <a href="https://www.washingtonpost.com/opinions/2023/07/11/banks-fed-stress-test-interest-rates/">same thing</a> about the latest batch of stress tests that banks passed: They did not model rising interest rates. <br /></p><p></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-2179808669492369332023-05-03T18:19:00.008+01:002023-05-03T18:32:18.405+01:00The Trials and Tribulations of Friendshoring<div class="separator"><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><img alt="US election sees China bashing by both parties - Global Times" aria-hidden="false" class="r48jcc pT0Scc iPVvYb" src="https://www.globaltimes.cn/Portals/0/attachment/2020/2020-04-22/38c81f10-6fcf-4c38-9088-953ef18b9dde.jpeg" style="height: 300px; margin: 0px auto; max-width: 500px; width: 500px;" /></td></tr><tr><td class="tr-caption" style="text-align: center;">At least Chinese state media's <a href="https://www.globaltimes.cn/content/1186439.shtml">take</a> on the topic is obvious.<br /></td></tr></tbody></table><p>Puns on the term "offshoring"--moving one's production facilities abroad, or having foreign-based concerns manufacture components for you--have proliferated. Some time thereafter came the term "reshoring" to denote moving back production to where something was once manufactured. (A US firm moving its plant back to America from China would be the most obvious example.) <br /></p></div><p>Now we have the slightly more convoluted term "<a href="https://www.atlanticcouncil.org/news/transcripts/transcript-us-treasury-secretary-janet-yellen-on-the-next-steps-for-russia-sanctions-and-friend-shoring-supply-chains/">friendshoring</a>" care of Treasury Secretary Janet Yellen. Like reshoring, friendshoring concerns moving production to locales more favorable to the company in question. For instance, if you had a plant in China, you may be moving it to Mexico to avoid Communist Party persecution of foreign firms through discriminatory regulation. Hence, both reshoring and friendshoring concern moving business activities to where authorities are more favorably disposed. However, the difference is that while reshoring is moving production back to where something was once made, friendshoring does not presume moving back, and the destination can be anyplace where authorities are amicable. That is, your risk of being put out of business by some Western-hating foreign autocrat is mitigated.</p><p>Or is it? There are a number of viewpoints out there regarding whether friendshoring is actually beneficial. The consulting firm Korn Ferry <a href="https://www.kornferry.com/insights/this-week-in-leadership/how-friend-shoring-can-create-enemies">cautions</a> that this practice may instead create enemies among countries you have chosen to leave. It boils down to the extent to which companies want to involve themselves in international politics:<br /></p><p></p><blockquote><p>“Friend-shoring can be extremely
risky,” says <a href="https://www.kornferry.com/about-us/consultants/tom-wrobleski">Tom Wrobleski</a>, co-leader
of Korn Ferry's Supply Chain Talent Optimization
practice. “You’re picking sides and can unintentionally forge bad blood
with other countries.” In the long term, this could backfire if
the country your company relies on—for lithium for batteries, say, or
precious metals for computer chips—feels alienated...</p><p>The puzzle grows still more complicated when it’s infused with values
and politics, says Wrobleski, who says these considerations play an
important role in the decision-making process. “There must be balance
between political alignment and the actual reason for doing business in
a particular country,” says Wrobleski. </p></blockquote><p></p><p>Speaking of politics, the <i>Wall Street Journal</i> <a href="https://www.wsj.com/articles/friend-shoring-might-be-bad-for-global-growth-inflation-11654437600">adds</a> that the wider effect of firms choosing sides by classifying the world into friends and foes through their location decisions could result in the fragmentation of global supply chains. "Unfriendly" countries may feel antagonized and choose to keep to themselves more. In so doing, key commodities and burgeoning markets that were previously open for business may become increasingly unavailable. This situation may partly explain the higher inflation being experienced worldwide nowadays. In economic jargon, diminished global economic integration increases trade frictions and therefore the ease and cost of doing business worldwide. </p><p>Weighing matters, Raghuram Rajan urges us to "<a href="https://www.jordantimes.com/opinion/raghuram-g-rajan/just-say-no-%E2%80%98friend-shoring%E2%80%99">just say no</a>" to friendshoring. Insofar as many poor countries are led by authoritarian figures who may come across as business unfriendly to Western firms, development may be hampered:</p><p></p><blockquote><p>The benefits [<i>of trade between rich and poor countries</i>] are obvious. Final products are significantly less
expensive, so even the poorest people in rich countries can buy them. At the same time, developing countries participate in the production
process, using their most valuable resource: Low-cost labour. As their
workers gain skills, their own manufacturers move to more sophisticated
production processes, climbing the value chain. As workers’ incomes
rise, they buy more rich-country products...</p><p>If any forthcoming friend-shoring mandates were to apply such a broad
categorisation, they would have devastating effects on international
trade. After all, friend-shoring will typically mean trading with
countries that have similar values and institutions; and that, in
practice, will mean transacting only with countries at similar levels of
development...</p>
<p>The benefits of a global supply chain stem precisely from the fact
that it involves countries with very different income levels, allowing
each to bring its comparative advantage to the production process, PhD
researchers from one, for example, and unskilled assembly-line workers
from another. Friend-shoring would tend to eliminate this dynamic,
thereby increasing production costs and consumer prices. While some
labor unions would welcome the reduced competition, the rest of us would
regret it.</p></blockquote><p></p><p>On top of diminished trade benefits, Rajan reiterates that friendshoring may encourage protectionism among those being discriminated against. What is a global supply chain manager to do? I'll have more to say about this topic in the future, but for now, it's safe to say that each company will need to weight the benefits of more predictable supply chains with likely costlier production in friendlier locations and the potential loss of market access to aggrieved "unfriendly" countries. </p><p>PS: If you have doubt the admittedly unwieldy term "friendshoring" is real, the IMF is already <a href="https://www.ft.com/content/b2f66486-80e5-425e-86e7-fe432da8aeec">observing</a> greater FDI among geopolitically aligned countries. The IMF further estimates potentially large efficiency losses due to this phenomenon. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-23650900715900530402023-04-29T21:32:00.003+01:002023-05-11T17:20:26.329+01:00ARM Holdings IPO: Ditch UK, Flee to US<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><img alt="Masayoshi Son, chairman and CEO of Softbank, ARM Holdings’ parent company, gives the keynote speech at SoftBank World 2016 in Tokyo in July 2016. Photo: VCG" height="266" src="https://img.caixin.com/2018-06-05/1528197260959377.jpg" style="margin-left: auto; margin-right: auto;" width="400" /></td></tr><tr><td class="tr-caption" style="text-align: center;">SoftBank-ARM was a fine idea at the time; now it's <a href="https://www.azlyrics.com/lyrics/elviscostello/brilliantmistake.html">a brilliant mistake</a>. <br /></td></tr></tbody></table><p>Hard as it may be to believe given how downtrodden it is now, Japan's SoftBank was once regarded as a formidable presence on the global technology stage. Sure, it always carried a fairly high level of debt, but its principal Masayoshi Son was regarded as an Asian tech visionary in the mold of a Bill Gates or Steve Jobs. Just as Japan, Inc. gorged on buying US properties in the 1980s, SoftBank gobbled global tech shares in the 2000s, culminating in the creation of Vision Fund for venture capital. Launched in 2017, the Vision Fund's losses have <a href="https://www.reuters.com/markets/asia/softbank-posts-loss-vision-fund-red-fourth-straight-quarter-2023-02-07/">dragged down</a> Softbank as of late. Casting such a wide net, some purchases were bound to be successes (like <a href="https://www.reuters.com/markets/deals/softbank-sell-nearly-all-its-stake-alibaba-ft-2023-04-12/">Alibaba</a>) while others were duds (like <a href="https://www.valuewalk.com/softbanks-worst-startup-investments/">WeWork</a>). Unfortunately, it seems SoftBank has had more of the latter than the former. <br /></p><p>Arguably SoftBank's crowning purchase was the UK's ARM Holdings for <a href="https://www.financierworldwide.com/softbank-to-acquire-arm-holdings-in-32bn-deal">$32 billion</a> in 2016. Based in the college town of Cambridge, ARM licenses leading-edge microchip designs used in almost all of today's smartphones. Such licensing revenue is huge. However, ARM has been shopped around for a number of years now to help resuscitate its parent company's finances. </p><p>From an international political economy standpoint, what is interesting is that ARM has chosen not to make its initial public offering (semantically a <i>re</i>-offering) on the London Stock Exchange where it was listed prior to SoftBank's 2016 purchase. Spurning national pride, it has chosen to list in the United States. So much for UK government entreaties to lure ARM back home, at least <a href="https://www.cnbc.com/2023/03/03/softbanks-arm-and-crh-choose-new-york-listing-in-a-blow-to-london.html">financially</a>: <br /></p><p></p><blockquote><p>“After engagement with the British Government and the [Financial
Conduct Authority] over several months, SoftBank and Arm have determined
that pursuing a U.S.-only listing of Arm in 2023 is the best path
forward for the company and its stakeholders,” Arm CEO Rene Haas said in
a statement. Arm did not completely rule out the possibility of
listing in London in the future, saying it was “proud of its British
heritage” and may consider a subsequent listing in the U.K. at a later
date. It provided no further details.</p><p>The decision comes despite
intensive lobbying efforts by the British government to persuade the
chip designer to list its shares in the U.K. capital. With 6,000 staff
globally and 3,000 based in the U.K., Cambridge-based Arm is widely
regarded as the <a href="https://www.cnbc.com/2023/01/09/uk-pm-sunak-restarts-talks-with-softbank-about-listing-arm-in-london.html">jewel in the crown of the British tech industry</a>.</p><p>The
company is a major force in the semiconductor market, licensing its
microchip designs to some of the world’s largest consumer tech
manufacturers. Around 95% of smartphones globally, including the Apple
iPhone, contain Arm-based processors.</p><span class="transition-fade-appear-done transition-fade-enter-done"><div class="MidResponsive-midResponsiveContainer"><div data-module="mps-slot" id="MidResponsive-1"></div></div></span><p>London
has relaxed its listings rules in an effort to attract leading global
tech companies to go public in the U.K. It faces barriers, with venture
capitalists complaining of a lack of understanding of often loss-making
tech ventures.</p></blockquote><p></p><p>Although the soon-to-be defunct Softbank-ARM linkup has many interesting
angles to it, there are two of particular note here: The <a href="https://www.ft.com/content/9b28bc12-5ccb-488b-a727-fc5eb5fbe210">fall</a> of
Masayoshi Son who though the world was his (tech) oyster is one. Another is the London Stock Exchange's
inability to attract tech IPOs. With many of its listings consisting of
traditional industries like energy and finance, the UK reputation as an investment destination for technology could literally
have received a shot in the ARM. But alas, it has just been <a href="https://www.reuters.com/markets/deals/softbanks-arm-registers-blockbuster-us-ipo-sources-2023-04-29/">announced</a> that ARM will soon list Stateside a few weeks after the UK was spurned:</p><p data-testid="paragraph-1"></p><blockquote><p data-testid="paragraph-1">SoftBank Group Corp's chip maker Arm Ltd has filed with regulators confidentially for a U.S.
stock market listing, Arm said on Saturday, setting the stage for this
year's largest initial public offering. The
IPO registration shows that Softbank is pressing ahead with the
blockbuster offering despite adverse market conditions, after saying <a data-testid="Link" href="https://www.reuters.com/markets/deals/softbanks-arm-pursue-us-only-listing-this-year-2023-03-03/">in March</a> that it planned to list Arm in the U.S. stock market.</p><p data-testid="paragraph-2">U.S.
IPOs, excluding listings for special purpose acquisition companies, are
down about 22% to a total of just $2.35 billion year-to-date, according
to Dealogic, as stock market volatility and economic uncertainty put
many IPO hopefuls off.</p><p data-testid="paragraph-3">Arm plans to sell
its shares on Nasdaq later this year, seeking to raise between $8
billion and $10 billion, people familiar with the matter said. In a
statement, which confirmed an earlier Reuters report on the planned IPO,
Arm said the size and price range for the offering has not yet been
determined.</p></blockquote><p data-testid="paragraph-3"></p><p data-testid="paragraph-3">The Matthew Effect is alive and well in tech, I guess. Given the UK's self-inflicted harm over Brexit, it is not unexpected that one of its national champions would prefer to list in the capital- and tech-intensive United States which already has many of tech's top firms. Maybe the UK will get a consolation prize of a secondary listing a few years down the road, but for now, it has come up empty.</p><p data-testid="paragraph-3">5/19 UPDATE: The ARM sale probably couldn't come sooner as the SoftBank Vision fund has just announced a scarcely believable <a href="https://www.ft.com/content/1dd470c2-be80-4887-83cc-87be93100a12">$39B loss</a>.<br /></p><p> </p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-1777051148099700052023-04-26T19:27:00.005+01:002023-04-26T20:36:59.693+01:00The IMF, Team Transitory & You<p><img alt="" src="https://www.imf.org/-/media/Images/IMF/Blog/Articles/Blog-Charts/2023/April/weo-chapter-2-charts-01.ashx" style="width: 750px;" /> <br /></p><p>I have a confession to make in being on board "<a href="https://www.bloomberg.com/news/articles/2023-02-01/transcript-viktor-shvets-declares-victory-for-team-transitory-and-the-soft-landing">team transitory</a>", or the belief that the recent (global) increase in inflation is due to largely temporary factors. As these factors fade, we are set to resume the previous economic environment of relatively benign inflation. On the demand side, these temporary factors include increased demand for consumer goods as people stayed more at home due to the pandemic. Economic stimulus provided by rich countries to their citizens further fueled this demand. On the supply side, disruptions in goods production, transportation and retail also arose due to the pandemic. More demand + less supply = inflation. <br /></p><p>Meanwhile, critics of the idea that high inflation is transitory argue that there have been changes in the world economy which contradict the transitory idea such as the emergence of a major war on the European continent--the first since the end of WWII--causing strains in the availability of commodities like energy and grains. Also, prices of not only goods but also services should be factored in since the latter have increased, too. In other words, inflation is becoming entrenched and is not a temporary phenomenon. </p><p>Little-noticed in this debate is the International Monetary Fund (IMF) <a href="https://www.imf.org/en/Blogs/Articles/2023/04/10/interest-rates-likely-to-return-towards-pre-pandemic-levels-when-inflation-is-tamed">weighing in</a> recently with its most recent take on the matter. According to the IMF, there were longstanding economic phenomena well underway before the pandemic that point to lower inflation whose momentum will be very difficult to overcome. These include: </p><ul><li>Total factor productivity falling significantly, which lowers economic output;</li><li>Demographic changes resulting in fewer persons of working age (and more retirees), which also reduces economic output;</li><li>For developed countries at least, inflows of capital from developing countries in search of more secure returns. </li></ul><p>While there too are factors pushing up rates such as running sizable national budget deficits (that have to be funded by offering higher returns to lenders), the overall picture in the developed world is of declining rates, on the balance. Here is another IMF chart: <br /></p><p><img alt="" src="https://www.imf.org/-/media/Images/IMF/Blog/Articles/Blog-Charts/2023/April/weo-chapter-2-charts-02.ashx" style="width: 750px;" /> </p><p>Absent some unforeseen modern-day productivity boom or baby boom, you would generally expect rates to trend downward in the developed countries. As they become older--like China whose population is already falling <a href="https://www.china-briefing.com/news/chinas-demographic-shift-how-population-decline-will-impact-doing-business-in-the-country/">outright</a>--developing countries should follow the same path. Add in other factors the IMF found also lead to lower rates such as elevated and rising inequality--rich people tend to save more and spend less--as well as the decreasing labor share of income--leaving workers with less disposable income--and the picture for rate moderation is compelling. </p><p>On this matter at least, I think this IMF research is spot on, with some caveats. We are not <i>quite</i> sure when current (transitory) inflation pressures let up precisely, but they will eventually be swamped by stronger factors favoring lower rates. Aging and diminished productivity along with a handful of other factors will lead us back to a low rate economic environment once more. You have to be brave to bet otherwise.<br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-77936253875356708232023-03-31T13:27:00.003+01:002023-04-01T06:50:22.491+01:00Geo/Econ Challenged: UK in CPTPP?<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><img alt="Second CPTPP Commission Meeting Logo" height="301" src="https://www.dfat.gov.au/sites/default/files/second-cptpp-commission-meeting-logo_eddfc586-591a-346c-aaf2-13dc98b2de99.png" style="margin-left: auto; margin-right: auto;" width="400" /></td></tr><tr><td class="tr-caption" style="text-align: center;">The UK will soon join this group, but does it really matter?<br /></td></tr></tbody></table><p>It has somehow come to pass that the UK has now joined an Asia-Pacific trade agreement. OK, so the free trade agreement in question is not the US-led Trans Pacific Partnership, but rather the US-absent Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Moreover, the Pacific is vast: the world's largest ocean is said to contain over half the world's waters. Still, an undeniable fact is that the UK is not in the Pacific. (The last time I checked, it also belonged to this group called the "North Atlantic Treaty Organization".) <br /></p><p>Chalk this oddity up to the Brexiteer pledge that leaving the European Union would somehow leave it better off by signing up to FTAs worldwide, and not just with the UK's neighbors. There are a few things to unpack before getting to the significance of this announcement, so here's a quick recap:</p><ul style="text-align: left;"><li>The trade-averse US government has continued post-Trump, meaning the US seems to have no <a href="https://www.scmp.com/week-asia/economics/article/3207222/japan-really-wants-us-join-cptpp-politically-weak-biden-isnt-interested">intention</a> of (re-)joining CPTPP. </li><li>Lacking a firmly "Western" prestige partner, the remaining CPTPP countries likely decided to allow negotiations to proceed with the UK anyway.<br /></li></ul><p>Now, to the <a href="https://www.bbc.com/news/business-65124741">crux</a> of the matter: are there significant economic benefits to be reaped by the UK from this agreement? The UK government estimates that their economy will gain 0.08% as a result over 10 years. <i>0.08%</i>. To me that seems to be a rounding error instead of a significant gain. Put it down to the UK already having existing FTAs with most CPTPP members and trading far less with these Asia-Pacific nations than with its European neighbors:<br /></p><div class="ssrcss-11r1m41-RichTextComponentWrapper ep2nwvo0" data-component="text-block"><div class="ssrcss-7uxr49-RichTextContainer e5tfeyi1"><p class="ssrcss-1q0x1qg-Paragraph eq5iqo00"></p><blockquote><p class="ssrcss-1q0x1qg-Paragraph eq5iqo00">The
Comprehensive and Progressive Agreement for Trans-Pacific Partnership -
or CPTPP - was established in 2018, and includes Australia, Brunei,
Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam. Membership of the CPTPP loosens restrictions on trade between members and reduce tariffs - a form of border tax - on goods.</p><div class="ssrcss-11r1m41-RichTextComponentWrapper ep2nwvo0" data-component="text-block"><div class="ssrcss-7uxr49-RichTextContainer e5tfeyi1"><p class="ssrcss-1q0x1qg-Paragraph eq5iqo00">However,
the gains for the UK from joining are expected to be modest. The UK
already has free trade deals with all of the members except Brunei and
Malaysia, some of which were rolled over from its previous membership of
the EU. And
even with some gains in trading the government only estimates it will
add 0.08% to the size of the economy in 10 years. The Office for Budget
Responsibility (OBR), which provides forecasts for the government, has
previously said <a class="ssrcss-k17ofw-InlineLink e1no5rhv0" href="https://www.bbc.co.uk/news/business-59070020">Brexit would reduce the UK's potential economic growth by about 4% in the long term.</a></p></div></div></blockquote></div></div><p></p><p>Simply put, joining CPTPP would only claw back, oh, 2% of the economic output lost from leaving the EU. It's as close to non-news as you can get in the economic realm. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-36873152339385563102022-12-20T10:36:00.003+00:002022-12-20T10:36:19.482+00:00Joe Biden, Oil Trader of the Year 2022?<p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJArdWaH_8Ks5_QkWZT7-dYQ5jolA1BIpfP6OGaukDUmBP6wrFvwUr51x-zgBSc-e6aQm9JKYjg-uQV-e_J8ImMaA4fn5VWLIwJFp7y-5M05LXHHo3dXhTmfVYBW5Ce-fpnjfkvUxNsajliiJH4iWD_GIp20SrpIG2YDvh-dBJQaVY1JSYz5oH-fTN/s1200/SPR.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="675" data-original-width="1200" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJArdWaH_8Ks5_QkWZT7-dYQ5jolA1BIpfP6OGaukDUmBP6wrFvwUr51x-zgBSc-e6aQm9JKYjg-uQV-e_J8ImMaA4fn5VWLIwJFp7y-5M05LXHHo3dXhTmfVYBW5Ce-fpnjfkvUxNsajliiJH4iWD_GIp20SrpIG2YDvh-dBJQaVY1JSYz5oH-fTN/w400-h225/SPR.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Of all people, Joe's got the magic touch with petroleum?<br /></td></tr></tbody></table><p>The endless number of foiled speculators attests to the difficulty of realizing the old adage about how to make money--<i>buy low, sell high</i>. Let's face it: ever-changing markets often result in us doing quite the opposite, and not making money in the process. Now, whenever we are asked to think about who are the least savvy market participants, we often identify governments--or more specifically, government officials. Not being keen market watchers with limited skin in the game--it's taxpayer money they are officially dealing with, not theirs--this sentiment is understandable. </p><p></p><p>Well lo and behold: <i>Quartz</i> is now <a href="https://finance.yahoo.com/news/joe-biden-made-oil-trade-161100302.html">touting</a> President Joe Biden's timely release from the US Strategic Petroleum Reserve (SPR) as the "oil trade of the year." In retrospect, his release at the near-top of the oil market a few months ago helped ease oil prices. Now that oil prices have come down quite a bit, the SPR is now being refilled. Yes, Biden is buying low after selling high:</p><p></p><blockquote><p>Instead, it appears the US government made the oil trade of the year:
Releasing 180 million barrels of crude from the Strategic Petroleum
Reserve between March and the end of this year in an effort to blunt the
effect of rising prices, the US government appears to have made <a data-rapid_p="17" data-v9y="0" data-ylk="slk:about $4 billion" href="https://www.wsj.com/articles/u-s-scores-4-billion-windfall-on-oil-reserve-sales-11671420244?mod=hp_lead_pos13" rel="nofollow noopener" target="_blank">about $4 billion</a>, as prices have fallen dramatically over the course of the year.</p><p>Selling when crude oil prices were high, the US captured billions in
value. By one widely-used measure, the price of crude oil in Texas
peaked at about $124 a barrel in March, and the average price during the
SPR sales period was about $96; today that oil costs just $73 per
barrel.<b> </b></p><p>These are paper profits, to be sure: The
US is still aiming to refill the reserve, and prices may rise as it
does so. On Dec. 16, the Department of Energy <a data-rapid_p="20" data-v9y="0" data-ylk="slk:put out a request" href="https://twitter.com/JavierBlas/status/1603803737998462976" rel="nofollow noopener" target="_blank">put out a request</a>
to purchase 3 million new barrels of crude, after releasing about 200
million barrels in 2022. There are currently about 382 million barrels
still in reserve.</p></blockquote><p> </p>
His genial manner has caused Joe Biden to be underestimated throughout his life. Can he now be called a market player as well in his eighth decade? <a href="https://www.cnbc.com/2019/09/11/t-boone-pickens-oracle-of-oil-and-corporate-raider-dies-at-91.html">T. Boone Pickens</a>, eat your heart out. <br />Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-61420488146572466152022-06-01T13:44:00.003+01:002022-06-01T14:02:35.507+01:00Apple iPad, Soon Made in Vietnam<p></p><p></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfSUVR952Juh4YlbhpDNjF6R6A1CFh17nCZ1CrVO2ja4KswdPrfPmjVjQ__qDmR7V_lQ9HO3UjW2h4xUpxXsTfSHW-3Gm-KVLffO8-db3YAmIWwMSPylbt8fVyMbigT43I48zaWh7hilhoLByNEePw-Oe6rJau3rmkJ2YDIe2u20UOtxO2BvAR4R_u/s1059/iPadPro.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="750" data-original-width="1059" height="227" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfSUVR952Juh4YlbhpDNjF6R6A1CFh17nCZ1CrVO2ja4KswdPrfPmjVjQ__qDmR7V_lQ9HO3UjW2h4xUpxXsTfSHW-3Gm-KVLffO8-db3YAmIWwMSPylbt8fVyMbigT43I48zaWh7hilhoLByNEePw-Oe6rJau3rmkJ2YDIe2u20UOtxO2BvAR4R_u/s320/iPadPro.png" width="320" /></a></div> China's epic recurring COVID-19 shutdowns have frustrated multinational corporations aiming for predictability in their supply chains. Sure, China still benefits from having globally-renowned tech clusters. However, having your production capabilities curtailed again and again due to a handful of (relatively mild) COVID-19 cases doesn't encourage foreign firms, as you would expect.<p></p><p>Not so long ago, I covered Vietnam's emergence as a major assembly hub for South Korea's Samsung [<a href="http://ipezone.blogspot.com/2015/03/and-vietnams-largest-foreign-investor.html">1</a>, <a href="http://ipezone.blogspot.com/2016/11/life-at-samsungs-vietnam-factory-after.html">2</a>]. In the years since, it's developed a reputation as a reliable production center for MNCs. It was perhaps inevitable that Apple, frustrated like many others with the PRC's lockdown shenanigans, would look to set up shop elsewhere. Voila! Apple is coming to <a href="https://asia.nikkei.com/Spotlight/Supply-Chain/Apple-to-shift-iPad-capacity-to-Vietnam-amid-China-supply-chain-woes">Vietnam</a>:</p><p></p><blockquote><p>For the first time ever Apple is moving some iPad production out of
China and shifting it to Vietnam after strict COVID lockdowns in and
around Shanghai led to months of supply chain disruptions, Nikkei Asia
has learned.</p><p>The U.S. company has also asked multiple component
suppliers to build up their inventories to guard against future
shortages and supply snags, sources said.</p><p>China's BYD, one of the
leading iPad assemblers, has helped Apple build production lines in
Vietnam and could soon start to produce a small number of the iconic
tablets there, people with knowledge of the matter said.</p></blockquote><p>To be sure, Apple already makes its wireless earphones in Vietnam. It makes business sense: experiment first with some components, and then shift further assembly work if things go well:</p><p></p><blockquote><p>The iPad will become the second major line of Apple products made in the
Southeast Asian country, following the AirPods earbud series. The move
highlights not only Apple's continuous efforts to diversify its supply
chain but also the growing importance of Vietnam to the company. <br /></p></blockquote><p>Also keep in mind that Vietnam is still mostly an assembly hub--stick socket A into socket B sort of mundane work. Many of the components for the "Vietnam-made" iPad will still come from, you guessed it, China. Hence, Apple wants to bolster supplier capabilities in parts of China that have a lower likelihood of being shut down based on the historical record:</p><p></p><blockquote><p>To further guard against supply chain disruptions, Apple has also
asked suppliers to build up additional supplies of components such as
printed circuit boards and mechanical and electronics parts, especially
those made in and around Shanghai, where COVID-related restrictions led
to shortages and logistic delays. In addition, the company has asked
suppliers to move quickly to secure supplies of some chips, especially
power-related ones, for the upcoming iPhones.</p><p>In
particular, Apple is asking suppliers outside of the lockdown-affected
areas to help build up a couple of months' worth of component supplies
to ensure supply continuity over the next few months. The requests apply
to all of Apple's product lines -- iPhones, iPads, AirPods and MacBooks
-- sources said.</p></blockquote><p></p><p> </p>
The next step in Vietnam's development is therefore obvious: to move from assembly to manufacturing components as well following in China's footsteps before it became lockdown land. Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-61759043136217611342022-06-01T13:02:00.004+01:002022-06-01T14:14:43.540+01:00Supply Chain Woes: Hainanese Chicken Rice<p></p><div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnJoLUYFO0mAWwB0pAU5G55pg3iXKAfKSzqPFC54hz581yueuqsolYZ-9WWgh4pPt7R0MdeOJa7x-_uT4U2ER0hQ49LOFSWqqT8ch32Gp4OHDFbYDXqdMo61l5mU7uAq0PtLT3aRc7n107G4SvvwxHPXha0514Ix2TdZAeTKEUTpNReLkt3sRXs_jJ/s1280/hainanese-chicken.jpg"><img border="0" data-original-height="960" data-original-width="1280" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnJoLUYFO0mAWwB0pAU5G55pg3iXKAfKSzqPFC54hz581yueuqsolYZ-9WWgh4pPt7R0MdeOJa7x-_uT4U2ER0hQ49LOFSWqqT8ch32Gp4OHDFbYDXqdMo61l5mU7uAq0PtLT3aRc7n107G4SvvwxHPXha0514Ix2TdZAeTKEUTpNReLkt3sRXs_jJ/w400-h300/hainanese-chicken.jpg" width="400" /></a></div>I've been watching <i>Channel News Asia</i> as of late, and a news item that struck me was the Malaysian ban on chicken exports starting this June. It's very much a supply chain issue: as the price (and hence availability) of chicken feed--comprised of grains and soybeans--has increased significantly, Malaysian chicken production has been reduced. Understandably, Malaysia is keen on having sufficient food for its populace before exporting it in this day and age of inflation and shortages. Unfortunately, neighboring Singapore has been negatively affected by Malaysia's impending chicken export ban. <p></p><p>Hainanese chicken rice is Singapore's signature <a href="https://www.visitsingapore.com/en_ph/dining-drinks-singapore/local-dishes/hainanese-chicken-rice/">dish</a>--a staple food in that wealthy Asian nation. Having little domestic chicken production, Singapore is reliant on imports from countries like Malaysia. Given its limited sources, Singaporeans now have to cope with this shortage. Let's begin with <a href="https://www.reuters.com/markets/commodities/singapores-de-facto-national-dish-crossfire-malaysia-bans-chicken-exports-2022-06-01/">constraints </a>on the supply end in Malaysia: </p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-11"></p><blockquote><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-11">Malaysia, itself facing soaring prices, has decided to halt chicken exports until local production and costs stabilise. Prices
have been capped since February at 8.90 ringgit ($2.03) per bird and a
subsidy of 729.43 million ringgit ($166 million) has been set aside for
poultry farmers.</p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-13">Chicken
feed typically consists of grain and soybean, which Malaysia imports.
But the government is having to consider alternatives amid a global feed
shortage. Lower
quality feed means the birds are not growing as fast as usual, slowing
down the entire supply chain, said poultry farmer Syaizul Abdullah
Syamil Zulkaffly.</p></blockquote><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-13"></p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-13">In turn, Singaporean food stalls have been feeling the pinch. To be sure, there are other sources of chicken such as Brazil. The problem, however, is that Brazil is much farther away than nearby Malaysia, necessitating freezing of chickens to the detriment of freshness and taste:</p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-7"></p><blockquote><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-7">Singapore,
although among the wealthiest countries in Asia, has a heavily
urbanised land area of just 730 square km (280 square miles) and relies
largely on imported food, energy and other goods. Nearly all of its
chicken is imported: 34% from Malaysia, 49% from Brazil and 12% from the
United States, according to data from Singapore Food Agency (SFA).</p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-8">A
plate of simple poached chicken and white rice cooked in broth served
with a side of greens is a dish beloved by the country's 5.5 million
people, and is usually widely available for about S$4 ($2.92) at
eateries known as hawker centres.</p><div class="spacing-container__container__2g5QT spacing-container__max-width__zScFd"><div class="ad-slot__container__FEnoz" style="--height: 18.399993896484375px;"><div class="ad-slot__inner__2u45U ad-slot__others__mQ8-F"><div><div class="ad-slot__slot__2lKAK" data-google-query-id="COfLvPCXjPgCFVMmlgodF_IFww" id="reuters_desktop_native_3" name="reuters_desktop_native_3"><div id="google_ads_iframe_/4735792/reuters.com/markets/commodities/article_4__container__" style="border: 0pt none;">The
SFA has said the shortfall can be offset by frozen chicken from Brazil,
and has urged consumers to opt for other protein sources like fish.</div></div></div></div></div></div></blockquote><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-9"></p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-9">Singapore being a wealthy country with more refined tastes, some restaurateurs would rather serve something else <a href="https://www.theguardian.com/world/2022/jun/01/like-mcdonalds-with-no-burgers-singapore-faces-chicken-shortage-as-malaysia-bans-export">rather than</a> frozen Brazilian chicken:</p><p class="dcr-xry7m2"></p><blockquote><p class="dcr-xry7m2">Some vendors have said they will stop selling
chicken altogether and instead find alternative dishes – bad news for
fans of Singapore’s much-loved dish of poached chicken, served with rice
cooked in stock, and chilli dip.</p><p class="dcr-xry7m2">The owner of the popular eatery Tian Tian Hainanese Chicken Rice <a data-link-name="in body link" href="https://www.straitstimes.com/singapore/tian-tian-hainanese-chicken-rice-may-stop-selling-dish-after-malaysia-starts-ban-on-chicken-exports">told the Singaporean outlet The Straits Times</a>
that it would stop serving chicken dishes if it could not get fresh
supplies. Its founder, Foo Kui Lian, said they would instead “bring back
dishes like fried tofu, fried pork chop and prawn salad, but we will
not use frozen chicken”.</p><p class="dcr-xry7m2">The Singapore <a data-component="auto-linked-tag" data-link-name="in body link" href="https://www.theguardian.com/food">Food</a>
Agency has encouraged the public to use frozen chicken, which is
imported from countries such as Brazil, or to try alternative meat or
fish, and to refrain from buying more than they need.</p></blockquote><p class="dcr-xry7m2"></p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-9">Singapore's situation has been <a href="https://www.theguardian.com/world/2022/jun/01/like-mcdonalds-with-no-burgers-singapore-faces-chicken-shortage-as-malaysia-bans-export">likened</a> to McDonalds without burgers, but the analogy is not quite correct in that they <i>do</i> have chicken--albeit of the frozen variety. Still, it's another timely illustration of food shortages you encounter nowadays due to supply chain disruptions occurring worldwide. <br /></p><p class="text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI" data-testid="paragraph-13"></p><p></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-69352631503957321392022-05-28T12:31:00.000+01:002022-05-28T12:31:04.895+01:00Biden's 'FTA-Less' IPEF Asia-Pacific Deal<p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiB2SK6m5j_U4pwH3vpA6Aj8FK7TTYvBBtKAFcAl62ZeWr7TSuuVwRDP1OPLd4hPU68tzBc-DY-YF4NYcZfYGLDz5KP0TNbFuPer3GdIvDCwyznTYAW3k4qexmHhmnj44J11lRsVNBQKjPY4apToNIhUnwKP_0a3YAzRRTwO4fac1xkY3om9jyT5Pwp/s960/BidenKishida.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="718" data-original-width="960" height="299" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiB2SK6m5j_U4pwH3vpA6Aj8FK7TTYvBBtKAFcAl62ZeWr7TSuuVwRDP1OPLd4hPU68tzBc-DY-YF4NYcZfYGLDz5KP0TNbFuPer3GdIvDCwyznTYAW3k4qexmHhmnj44J11lRsVNBQKjPY4apToNIhUnwKP_0a3YAzRRTwO4fac1xkY3om9jyT5Pwp/w400-h299/BidenKishida.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Japan usually goes along with US economic plans... but how about other Asian countries? </td><td class="tr-caption" style="text-align: center;"><br /></td></tr></tbody></table> </p><p>Before Trump, the Republican Party represented the pro-trade American political party--especially in contrast to the trade union-dependent Democratic Party. Although Democratic presidents like Clinton and Obama promoted free trade agreements, they relied on Republican support to push FTAs through. After Trump, 'free trade' has become a dirty term in American politics regardless of party. So how is President Biden to shore up America's presence in the Asia-Pacific after his predecessor Barack Obama proposed the Trans-Pacific Partnership subsequently abandoned by Donald Trump? The answer is... do away with 'free trade' altogether. <br /></p><p>I am not sure what appeal Biden's Indo-Pacific Economic Framework for Prosperity [IPEF] offers to Asian countries absent the usual tariff reductions. The details of IPEF are still very much to be determined based on consultations with the proposed participants. At best, it could represent useful technical assistance to others about making their economies more connected, resilient, clean, and fair. At worst, it could actually <i>worsen</i> trade access--especially to the vast American market--by imposing developed country environmental and labor standards on developing countries. </p><p>At this stage, all we have to go on are the following <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/fact-sheet-in-asia-president-biden-and-a-dozen-indo-pacific-partners-launch-the-indo-pacific-economic-framework-for-prosperity/">bullet points</a>: <br /></p><ul><li>Connected Economy: On trade, we will engage comprehensively with
our partners on a wide range of issues. We will pursue high-standard
rules of the road in the digital economy, including standards on
cross-border data flows and data localization. We will work with our
partners to seize opportunities and address concerns in the digital
economy, in order to ensure small and medium sized enterprises can
benefit from the region’s rapidly growing e-commerce sector, while
addressing issues is such as online privacy and discriminatory and
unethical use of Artificial Intelligence. <b>We will also seek strong labor
and environment standards and corporate accountability provisions that
promote a race to the top for workers through trade</b> [<i>my emphasis</i>].<br /></li><li>Resilient
Economy: We will seek first-of-their-kind supply chain commitments that
better anticipate and prevent disruptions in supply chains to create a
more resilient economy and guard against price spikes that increase
costs for American families. We intend to do this by establishing an
early warning system, mapping critical mineral supply chains, improving
traceability in key sectors, and coordinating on diversification
efforts.</li><li>Clean Economy: We will seek first-of-their-kind
commitments on clean energy, decarbonization, and infrastructure that
promote good-paying jobs. We will pursue concrete, high-ambition targets
that will accelerate efforts to tackle the climate crisis, including in
the areas of renewable energy, carbon removal, energy efficiency
standards, and new measures to combat methane emissions. </li><li>Fair
Economy: We will seek commitments to enact and enforce effective tax,
anti-money laundering, and anti-bribery regimes that are in line with
our existing multilateral obligations to promote a fair economy. These
will include provisions on the exchange of tax information,
criminalization of bribery in accordance with UN standards, and
effective implementation of beneficial ownership recommendations to
strengthen our efforts to crack down on corruption.</li></ul><p>Right now, IPEF is still nebulous enough to be vaporware. For others, there is a possibility that IPEF is largely downside (a grab bag of broadly protectionist US priorities) without upside (enhanced market access especially through lower tariffs). <br /></p><p></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-31412658336438170642021-12-21T13:19:00.004+00:002021-12-21T13:19:29.960+00:00Shein and Faster Fashion's Emergence<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjJMWAcSX-IpboEM4Og8suAqtOB5BHTjX8Y6iVi3JUXNxxrkt8JJBk-O957vL3cMg91Yv9SfHYjjGszYuzCF-Jcy8mbLix0cQ3u22tOMJ1GrO3-4LkA8_Zn2MuZkvWoV2r208oZhRf6s7I2RJ7ffC29W0usoiBlYECafCtONbj2TvDHUYBfftroftJT=s800" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="445" data-original-width="800" height="223" src="https://blogger.googleusercontent.com/img/a/AVvXsEjJMWAcSX-IpboEM4Og8suAqtOB5BHTjX8Y6iVi3JUXNxxrkt8JJBk-O957vL3cMg91Yv9SfHYjjGszYuzCF-Jcy8mbLix0cQ3u22tOMJ1GrO3-4LkA8_Zn2MuZkvWoV2r208oZhRf6s7I2RJ7ffC29W0usoiBlYECafCtONbj2TvDHUYBfftroftJT=w400-h223" width="400" /></a></div>Much has already been written about the emergence of "fast fashion": clothing retailers that are able to translate trends seen on the world's fashion runways... to a store near you in a matter of weeks. The success stories of Sweden's H&M and Spain's Mango have become the <a href="https://hbr.org/2012/12/the-gift-that-keeps-giving-bus">stuff</a> of business legend in upending the fashion industry in recent decades. It was probably only a matter of time that onetime suppliers in China would become the firms at the cutting edge of evolving to customer's whims and desires that move so quickly. <p></p><p>Younger women should be familiar with China-based online retailer Shein. Reflecting the democratization of fashion brought by the online world, it's not the big fashion houses that set today's trends but rather posts on the likes of Instagram and Pinterest. In keeping with the times, Shein is almost entirely an Internet selling pure play instead of having bricks-and-mortar stores still like H&M or Zara. <i>Rest of the World</i> writes more about this emerging business <a href="https://restofworld.org/2021/how-shein-beat-amazon-and-reinvented-fast-fashion/">success story</a>:<br /></p><p></p><blockquote><p>Shein eventually expanded to offer apparel for women, men, and
children, as well as everything from home goods to pet supplies, but its
core business remains selling clothes targeted at women in their teens
and 20s — a generation who grew up exploring their personal style on
platforms like Instagram and Pinterest. </p>
<p>Its clothes aren’t intended for Chinese customers, but are destined
for export. In May, the company became the most popular shopping app in
the U.S. on both Android and iOS, and, <a href="https://techcrunch.com/2021/05/18/shein-overtakes-amazon/" rel="noopener noreferrer" target="_blank">the same month</a>, topped the iOS rankings in over 50 other countries. It’s the second <a href="https://www.similarweb.com/top-websites/category/lifestyle/fashion-and-apparel/" rel="noopener noreferrer" target="_blank">most popular</a> fashion website worldwide.</p><p>By 2020, Shein’s sales had risen to $10 billion, a 250% jump from the year before, according to <a href="https://www.bloomberg.com/news/articles/2021-06-14/online-fashion-giant-shein-emerged-from-china-thanks-to-donald-trump-s-trade-war?sref=QYWxDQ1o" rel="noopener noreferrer" target="_blank">Bloomberg</a>. In June, the company<a href="https://www.earnestresearch.com/data-bites/shein-leads-fast-fashion/" rel="noopener noreferrer" target="_blank"> accounted</a> for 28% of all fast fashion sales in the U.S. — almost as much as both H&M and Zara combined. The same month, a <a href="https://supchina.com/2021/06/09/a-look-inside-shein-the-45-billion-retail-enigma-upending-the-global-fashion-industry/" rel="noopener noreferrer" target="_blank">report</a> circulated that Shein was worth over $47 billion, making it one of the tech industry’s <a href="https://asia.nikkei.com/Business/Business-trends/China-s-fast-fashion-newcomers-target-Zara-in-global-push" rel="noopener noreferrer" target="_blank">most valuable</a> private startups.</p></blockquote><p></p><p>Think of Shein more as an Amazon-a-like instead of comparing it to the established fast fashion names in terms of its business model: <br /></p><blockquote><p>At the heart of these issues is Shein’s aggressive business model.
Comparisons to fast-fashion giants like H&M miss the point: it’s
more like Amazon, operating a sprawling online marketplace that brings
together around 6,000<strong> </strong>Chinese clothing factories. It
unites them with proprietary internal management software that collects
near-instant feedback about which items are hits or misses, allowing
Shein to order new inventory virtually on demand. Designs are
commissioned through the software; some original, others picked from the
factories’ existing products. A polished advertising operation is
layered over the top, run from Shein’s head offices in Guangzhou.</p></blockquote><p></p><p>Ethical concerns with work conditions in Chinese garment factories aside, Shein's advantage is being able to call on PRC suppliers to shift even more quickly than European fast fashion firms:</p><blockquote><p>For years, European brands like Zara and H&M have embodied fast
fashion, shortening the route from runway to storefront from months to
weeks. But Shein isn’t chasing runway trends — rather, it often knocks
off items seen on TikTok and Instagram, where hype cycles move
significantly faster. Whereas Zara typically asks manufacturers to turn
around minimum orders of 2,000 items in 30 days, Shein asks for as few
as 100 products in as little as 10 days. “They want factories to be much
more nimble,” said Lu.</p></blockquote><p>If speed is Shein's competitive advantage, it must adapt to even quicker cycles going forward. Or, will someone even speedier supplant Shein just as it has H&M and Zara (which outran department stores before them)? Something else I thought the article could have shed more light on is how Shein is working around supply chain snags like the US-China trade war, intermittent COVID-19 lockdowns in the PRC, and rising shipping costs. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-58431503470226123022021-11-20T08:56:00.002+00:002021-11-20T09:18:44.933+00:002021's Miseries: The Great Creatine Shortage<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizJZUF9E5S3n30d1ECNDIuiEGmtG7BRjkYBOUDOwEWRX5skwOIpO6ecRVLA8C3QdsbJFQfv68KfZiNRcaTDAxuWOIrwqOhQSdQDDY6N_sfGQsVbr2gX5M02WwNTv5zRY_m7M8rmbS0G1Y/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="836" data-original-width="1254" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizJZUF9E5S3n30d1ECNDIuiEGmtG7BRjkYBOUDOwEWRX5skwOIpO6ecRVLA8C3QdsbJFQfv68KfZiNRcaTDAxuWOIrwqOhQSdQDDY6N_sfGQsVbr2gX5M02WwNTv5zRY_m7M8rmbS0G1Y/" width="320" /></a></div>By now, it should be obvious to just about everyone that goods whose availability we once took for granted are in short supply. Blame COVID-19 lockdowns affecting countries where these goods are being produced, a breakdown in air/sea/land transport logistics, and so on. The pre-COVID-19 world was built on distributing manufacturing facilities where things could be made most efficiently, assuming fairly inexpensive shipping even across vast distances. Is that world now gone? We'll have to wait and see if and when the pandemic subsides. <br /><p></p><p>In the meantime, here's another not-quite-amusing example for those encountering these shortages: A few days ago, I noticed that my supplies for the exercise supplement creatine monohydrate were running low. I experienced sticker shock while scanning current selling prices. Briefly, what creatine <a href="https://www1.udel.edu/chem/C465/senior/fall00/Performance1/phosphocreatine.htm.html">does</a> is replenish the body's supply of adenosine triphosphate (ATP), which fuels muscle contractions such as while performing resistance training. It turns out that most of creatine's precursors come from (surprise!) China. As many of you are probably aware, China has taken a zero tolerance approach to confronting COVID-19 outbreaks. With production centers and major port cities not immune to these recurrent lockdowns, creatine supplies have taken a hit. Here is a detailed and enlightening discussion of the ongoing creatine shortage from the<i> <a href="https://www.naturalproductsinsider.com/supply-chain/tighter-export-regulations-covid-disrupt-energy-ingredient-supply">Natural Products Insider</a></i>:<br /></p><p></p><blockquote>Strict export regulations and regional COVID-related limitations are
slowing China-originating supply chains for two top sports nutrition
energy ingredients, caffeine and creatine. Outside of China, suppliers
and manufacturers are clamoring to beef up inventories of these
increasingly hard-to-find materials but face steeply rising prices for
whatever supply they can secure [...] Similarly, the price of creatine has risen from its consistent $4 per kilo to between $10 and $14/kg.</blockquote><p></p><p>There is more good detail: <br /></p><p></p><blockquote><p>More unique to the sports nutrition industry is creatine, which
factors into energy production in the body and is popular with core
market users, namely bodybuilders and athletes looking to boost muscle,
performance and recovery. “There is a worldwide creatine shortage,” confirmed Jeff Golini,
Ph.D., executive scientist for All American Pharmaceutical, who
confirmed all the raw material to manufacture creatine comes out of
China, meaning this shortage impacts all forms of creatine, from
monohydrate to hydrochloride (HCl).
</p><p>Thus, while suppliers such as AlzChem Trostberg GmBh (Creapure) and
All American Pharmaceutical (Kre-Alkalyn) make their ingredients in
Germany and Montana, respectively, their starter materials come out of
China, placing even these suppliers in the impact zone. What’s behind the shortage is not quite clear and asking different
“insiders” results in varying answers, including lots of guesswork and
perspectives.
</p><p>Vitajoy sells both caffeine and creatine, and Crane said as far as he
can tell the shortage is related to the pandemic. His sources suggested
COVID-related issues in the northern area of China, where most creatine
factories reside, caused production facility closures. “I believe that
is what might have started the ball rolling,” he reasoned. “From there
it was reported that there were some starting material issues and,
before you knew it, any availability in creatine was gone.”</p>
</blockquote><p>Worse yet, the US-China trade conflict seems to be worsening availability: <br /></p><p></p><blockquote><p>Golini attributed the shortage to changing world politics, including
the recent U.S. presidential administration transition, and the ongoing
global power struggle involving trade. “China now is saying we have a
shortage of everything in order to re-control the world market, create
demand and raise pricing,” he said. “From creatine to resins to make
plastics to pipe to erythritol to you name it.”</p>
<p>“Creatine is $14/kg if you can find it,” Kneller lamented. Crane noted pricing went from around $4 to more than $8/kg in a
matter of months. “We feel like we might be seeing some daylight
regarding supply in the coming months, but it’s hard to pinpoint exactly
when,” he reasoned. Golini sees a longer struggle. “This shortage for creatine—as a
matter of fact, there is none [available]—will continue this entire
year, and you will see pricing go through the roof,” he warned.</p></blockquote><p>Then there are the aforementioned regional shutdowns for COVID-19 containment--including areas crucial for creatine supply chains. These include Wuhan itself: <br /></p>
<p></p><blockquote><p>Creatine producers appear
concentrated in the northeastern province of Hebei, near the Yellow Sea
separating China from both Koreas and Japan [...] In January 2021, <a data-feathr-click-track="true" href="https://www.npr.org/sections/coronavirus-live-updates/2021/01/13/956282429/province-in-china-on-lockdown-after-biggest-coronavirus-spike-in-months">Chinese officials locked down the city of Shijiazhuang</a>,
the capital Hebei, and other areas of the province due to a COVID
outbreak. Hebei Hangwang Import and Export Trading Co. Ltd., Sure
Chemical Co. Ltd. Shijiazhuang and other creatine producers are located
in this city. However, this <a data-feathr-click-track="true" href="https://www.cbc.ca/news/world/china-lift-hubei-lockdown-1.5507908">restriction was lifted March 25</a>, leaving only the city of Wuhan, Hebei, still under a lockdown that was lifted April 7. According to <a data-feathr-click-track="true" href="https://www.made-in-china.com/manufacturers/creatine-monohydrate.html">Made in China</a>, several creatine suppliers are located in Wuhan, where COVID was first detected in China.
</p><p>The bottom line is supply chain disruptions have become more common
and rolling over the past several years due, among several reasons, to
trade wars and the pandemic. Many supplement companies have grown to
accept this fact, take steps to be better prepared and hope situations
improve. “We expect global supply chain disruptions to follow COVID,” Titlow
summarized. “The better COVID is managed (e.g. vaccines), the better the
supply chain.”</p></blockquote><p>There's even an amusing <a href="https://www.youtube.com/watch?v=t6_QeJFZsdM">video</a> online about bodybuilders regarding the creatine shortage as a harrowing event of enormous proportions. These are not quite the best of times for global supply chains; that much is clear. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-77557790365518695652021-11-09T03:11:00.010+00:002021-11-09T03:15:38.141+00:00Oil Crisis? Bah. UK’s Fake Tan Shortage<p></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8dCSKEE776ZfEVyxGVOfpLoJVvgDOCZF6ADEQiFoa9u8-VSrgc7xUnKUN28BvW9MrUf01bYOQDzeBAv-wvgOl95y75wUEhxgoItKC_MGncP5SohIIFBalv9VI73kpc6jVWA2hq1R2NXU/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1219" data-original-width="2579" height="189" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8dCSKEE776ZfEVyxGVOfpLoJVvgDOCZF6ADEQiFoa9u8-VSrgc7xUnKUN28BvW9MrUf01bYOQDzeBAv-wvgOl95y75wUEhxgoItKC_MGncP5SohIIFBalv9VI73kpc6jVWA2hq1R2NXU/w400-h189/SprayTan+%25282%2529.jpg" width="400" /></a></div>There are all sorts of unexpected but fairly amusing shortages occurring worldwide given supply chain snarls that are happening as the world deals with the ongoing pandemic. It seems that spreading out manufacturing and sourcing locations to far-flung areas of the globe makes less sense when logistical hurdles arise due to lockdowns as COVID-19 surges pop up again and again in various key countries. <p></p><p>Take, for instance, <a href="https://ph.news.yahoo.com/fake-tan-cosmetics-shortage-uk-supply-chain-crisis-105106686.html">ethoxydiglycol</a>. This chemical sourced from places
like (surprise!) China are in short supply in Europe. Without it, a lot
of formulations for cosmetics cannot function properly. Ever wonder how
UK celebrities maintain that year-round glow despite the onset of
winter? Well, their beauty secrets may be unraveling real soon unless
these supply chain issues are worked out:</p><blockquote><p>The UK could be on the cusp of a cosmetics shortage as prices balloon
for a vital chemical used in many eczema creams, fake tans and
shampoos. A chemical called ethoxydiglycol has been described as
the "unsung hero" of cosmetics. It is part of the formula that improves
the way cosmetics are applied to the skin. Without it, many cosmetic
products as we know them would be unusable.</p><p>Ethoxydiglycol is
widely used in cosmetic products because it is soluble in both oil and
water-based products, such as propylene glycol, water, vegetable oil and
ethanol. The shortage, which is expected to hit UK and European
cosmetics manufacturing in the next few weeks, has already seen a near
ten-fold price hike. </p></blockquote><p></p><p>While price hikes have become necessary in light of what's happening, they may rise yet further:</p><p></p><blockquote><p>Ethoxydiglycol prices have increased from £12.10 ($16.50) to £103 per
kg in recent weeks. Many suppliers are now completely out of stock. Minimum
order quantities set by many suppliers have also increased from 24kg to
1,000kg. This means that the minimum order to purchase Ethoxydigylcol
is £103,000, which will halt production for many smaller businesses who
cannot afford to purchase in those quantities.</p></blockquote><p>In keeping with the concept of economies of scale, it's often the little guys who get hurt the most. </p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-65175581346850503392021-11-01T15:58:00.006+00:002021-11-01T16:00:35.968+00:00Bitcoin's Astounding Environmental Cost<p style="text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzWDIMchGIjla9ulgvX_XakWDaJRpgcZVc8h_yfbP0i6MXUokJ3ApCQoC_l_C3VTiIt1K8udPyeYW6NV9RoY3b8GPeGBMn2sxBZOo8fqtVpG0mci6U6Txo0eC93UD53MBDAWODZxz9SNQ/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="184" data-original-width="273" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzWDIMchGIjla9ulgvX_XakWDaJRpgcZVc8h_yfbP0i6MXUokJ3ApCQoC_l_C3VTiIt1K8udPyeYW6NV9RoY3b8GPeGBMn2sxBZOo8fqtVpG0mci6U6Txo0eC93UD53MBDAWODZxz9SNQ/" width="320" /></a></p><p>There's an interesting <a href="https://fortune.com/2021/10/26/bitcoin-electricity-consumption-carbon-footprin/">article</a> in <i>Fortune</i> on the true environmental costs of using Bitcoin as a medium of exchange to replace cash, debit cards, credit cards, and other commonly-used payment methods. Given the enormous amounts of electricity needed for bitcoin mining, it is perhaps no surprise that estimates on the high end find it to be an unsustainable proposition. So much for using Bitcoin for everyday transactions?</p><p></p><blockquote>The [MoneySuperMarket] report states that each Bitcoin transaction consumes 1,173 kilowatt
hours of electricity. That's the volume of energy that could "power the
typical American home for six weeks," the authors add. The Bitcoin
mining that enables a purchase, sale or transfer, it posits, uses a slug
of electricity that costs $176. That number is based on an average
worldwide cost per kWh of 9.0 cents over the past 12 months.</blockquote><p></p><p>What it we lower the estimated price per kilowatt hour to 5.0 cents? Some argue that figure is more in line with global energy costs. I am afraid that does little to make Bitcoin any more sensible as a means to transact given the costs of generating these coins still:</p><p></p><blockquote>So let's reduce the MoneySuperMarket number from 9 cents per kWh to the 5
cents favored by de Vries. That would put the average cost of producing
a coin at around $19,000, which looks reasonable (and underscores the
industry's gigantic profitability as price hovers at over three times
that level). At 5 cents, the electricity cost per transaction would fall
from $176 to roughly $100.</blockquote><p></p><p>For every transaction you make with Bitcoin, that's what you would be paying in electricity costs. When the likes of Visa and Mastercard can process these sorts of transactions for cents, it puts Bitcoin's true costs into sharp relief. The argument that ever-lower cost locations for mining these coins is a solution has its limits too, with these destinations now discouraging Bitcoin mining as power outages arise as a result. The global movement of Bitcoin miners eventually becoming <i>persona non grata</i> is a very interesting story in itself, but I digress...<br /></p><p></p><blockquote>Bitcoin's drawback is that electricity is finite, and what Bitcoin uses,
a family or a business can't use. In several nations, Bitcoin mining is
imposing severe stress on the grid. Kazakhstan, one of world's leading
crypto mining hubs and a top destination for producers displaced by the
Chinese lockdown, is suffering blackouts caused by the industry's sudden
explosion within its borders. Its government is limiting producers to a
fraction of the electricity they're now deploying. Iran has also
suffered severe shortages that's led to ejecting producers, and tiny
Abkhazia is raiding mines––many of them illegal––to forestall an energy
crisis.</blockquote><p></p><p>The bottom line is that Bitcoin mining in its current form is unsustainable, and so is its use as a medium of exchange. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-67725174482801008532021-08-30T16:36:00.002+01:002021-11-09T03:18:41.123+00:00Next in the PRC Firing Line: Hermes, Gucci?<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEistHSMzOvdNY-BhIDd3-TLmiK3BmwND-LgXdPa5pk25ZyyUAthaAmO2OjrriFORRn2u_dj9UmAISgYKwhg4HaYea1QQ072MP7hnTk9lGA3tN8c22kcGEChP7aku_Es0hIJGaBmSoUT2ys/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="800" data-original-width="1200" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEistHSMzOvdNY-BhIDd3-TLmiK3BmwND-LgXdPa5pk25ZyyUAthaAmO2OjrriFORRn2u_dj9UmAISgYKwhg4HaYea1QQ072MP7hnTk9lGA3tN8c22kcGEChP7aku_Es0hIJGaBmSoUT2ys/" width="320" /></a> <br /></div><p></p><p>Unless you've been hiding under a rock these past few months, headlines about how the PRC is <a href="https://www.bbc.com/news/business-58182658">cracking down</a> on its most lucrative companies--Internet-based services, video games, online education, and the rest--have dominated business news. This crackdown is ostensibly in the name of maintaining social order--not letting inequality get out of hand, not getting young people hooked on mindless games, and so forth. This social engineering is most evident in new rules aiming to restrict hours spent by those under 18 on video games to no more than <a href="https://www.reuters.com/world/china/china-rolls-out-new-rules-minors-online-gaming-xinhua-2021-08-30/">three</a>. <br /></p><p>So far, the largest victims of this erstwhile Xi Jinping-organized socialist putsch have been local firms. However, those feared to be next in the firing line are foreign purveyors of luxury goods. Are they next in line in being <a href="https://asia.nikkei.com/Business/Business-trends/Hermes-Gucci-fear-crackdown-under-Xi-s-common-prosperity-push">styled</a> as "enemies of the people"?<br /></p><p></p><blockquote><p>Chinese President Xi Jinping has stepped up his call for "common
prosperity," sending shudders through luxury goods vendors, which worry
that China's rich will not be able to splurge on $3,000 bags. </p><p>The
fear was palpable on the stock market last week. Shares of Paris-listed
Kering, owner of the Gucci brand, slumped 17%. Switzerland's Richemont,
the company behind such names as Cartier and Piaget, sank 14%. LVMH
Moet Hennessy Louis Vuitton and Hermes slid 13% and 8%. Makers of
high-end cars were hit as well, with Porsche down 10% and Ferrari 6%.</p><p>The
catalyst was Xi's call for "common prosperity" as part of "high-quality
economic development" last week at a meeting of the Chinese Communist
Party's Central Committee for Financial and Economic Affairs. The
committee called for adjusting "excessive incomes" and redistributing
wealth that has become overly concentrated in the hands of a small
number of people.</p></blockquote><p>Veteran China commentator <a href="https://www.cnbc.com/2021/08/25/ray-dalio-wrong-about-china-tech-crackdown-economist-says.html">George Magnus</a> (ex-UBS) I believe has it right when he says the current crackdown has more to do with the Communist Party maintaining control than any sort of re-commitment to socialist principles. Insofar as the likes of Alibaba and Tencent were gaining more and more of the "mindshare" of the Chinese people, they posed a threat to Communist Party fealty. Hence, they had to be knocked down to size to ensure that no other gods would be placed before the Party.</p><p>My belief is that Western luxury brands are not as vulnerable for this reason: while they may symbolize the wrong things like conspicuous consumption, they do not really pose a threat to the control that the Party has on various aspects of Chinese life--political, economic, social or technological. Ironically, it's the domestic tech giants who pose more of those kinds of threats, hence the recent actions. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-61186066253617926002021-08-12T18:11:00.002+01:002021-08-12T18:15:11.653+01:00Is Childbearing Immoral Amid Climate Change?<p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNceAg-_c3NgzokJxtq8rSVrPb3LgvdmkuHNHyGunWTMhHx-1P4fe1iF99_gco_klbBa9jZOy0tyQjAUzRPSSn7kxwgW_7ntGpP8Xa4uEqXjTWdlqczdz9U-U6-2Ttt08uv52Z4p-EKmI/s700/BeFruitful.webp" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="548" data-original-width="700" height="251" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNceAg-_c3NgzokJxtq8rSVrPb3LgvdmkuHNHyGunWTMhHx-1P4fe1iF99_gco_klbBa9jZOy0tyQjAUzRPSSn7kxwgW_7ntGpP8Xa4uEqXjTWdlqczdz9U-U6-2Ttt08uv52Z4p-EKmI/s320/BeFruitful.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Be fruitful and multiply during the age of climate change? Think again. </td><td class="tr-caption" style="text-align: center;"><br /></td><td class="tr-caption" style="text-align: center;"><br /></td></tr></tbody></table><p></p><p>One of the most fascinating <a href="https://www.cnbc.com/2021/08/12/climate-change-is-making-people-think-twice-about-having-children.html">existential questions</a> has been posed on the business news channel CNBC, of all places, as would-be parents consider the wisdom of having children. While there are climate deniers like most of the US <a href="https://www.americanprogress.org/issues/green/news/2021/03/30/497685/climate-deniers-117th-congress/">Republican Party</a> and other reality-challenged individuals, most reasonable people accept the premise that global temperatures are rising due to human activity. The recent IPCC <a href="https://www.npr.org/2021/08/09/1025898341/major-report-warns-climate-change-is-accelerating-and-humans-must-cut-emissions-">report</a> leaves us in no doubt that things are getting worse in this regard. Already, we are <a href="https://www.space.com/2021-record-wildfire-season-from-space">witnessing</a> severe climate change negatively affecting human life. So, the question is: <i>Does it make sense to have children who will grow up on a degraded planet?</i><br /></p><p>The article is interesting in probing a number of angles on this question, the answer to which will ultimately have significant implications on the future of humanity:</p><p>1. What is the carbon footprint of raising a child?</p><p>2. How does a warming planet impact fertility rates?</p><p>3. Is it ethical to bear children knowing their quality of life will be negatively impacted by worsening climate change? </p><p>As a Catholic educator, the third question is the most interesting one to me. The obvious "Christian" answer would be that we should not presume things will get worse: It is still within the current generation's abilities to limit the future negative effects of climate change on future generations, although that window of opportunity is rapidly closing (see Pope Francis' 2015 encyclical <i><a href="https://www.vatican.va/content/francesco/en/encyclicals/documents/papa-francesco_20150524_enciclica-laudato-si.html">Laudato Si</a></i>). Given the massive collective action problems we have, though--including a main political party in the world's second-largest carbon emitter the United States denying the very existence of climate change--what are the chances of global citizens clamoring and working towards improvement? As the article suggests, more thoughtful would-be parents are giving these considerations a lot of though provided the almost non-existent progress on arresting warming trends observed around the world. </p><p>There are no easy answers going forward. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-18307731163769124102021-06-27T17:07:00.009+01:002021-06-27T17:11:11.670+01:00Falling Births? US Needs to Actually be Livable<p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzB0Cu2IFfERpAkuZOjPc6HNjJ4lR-UOw-GtCAME2eCDbnvZxEm4rqxXOXvaxGoMJid87-Y3zLUZjwAEHefrVhpqvADm_NUKuNccBaCn7quOu2Vm2mymZVEpwimNVjEV1CT84veiP85bY/s284/shiningcity.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="177" data-original-width="284" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzB0Cu2IFfERpAkuZOjPc6HNjJ4lR-UOw-GtCAME2eCDbnvZxEm4rqxXOXvaxGoMJid87-Y3zLUZjwAEHefrVhpqvADm_NUKuNccBaCn7quOu2Vm2mymZVEpwimNVjEV1CT84veiP85bY/s0/shiningcity.jpg" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Ever consider that the US birthrate is dropping precipitously since it's a rather s--tty place to live?<br /></td></tr></tbody></table> <p></p><p>Like most developed countries, the United States is experiencing cratering birth rates. If the replacement rate is 2.1 birth per woman, its current <a href="https://www.bbc.com/news/world-us-canada-57003722">reported</a> rate of 1.6 is well below that. In other words, depopulation will set in for America just as it has for the likes of Japan and others if births continue to crater and anti-immigrant sentiment scares off would-be migrants. Fewer birth and nobody being welcomed inevitably spells depopulation. <br /></p><p>Although the United States likes to portray itself in all sorts of self-aggrandizing ways--the promised land, shining city upon a hill, and all that jazz--the truth is that its livability is rather worse than any number of other places.A <i>Bloomberg</i> <a href="https://www.bloomberg.com/opinion/articles/2021-05-11/can-americans-be-encouraged-to-have-more-babies">interview</a> with demographer Lyman Stone has some interesting things to say on the matter. First, flexible work may not be the solution: <br /></p><p><span></span></p><blockquote>I think policymakers still have this delusion that the path to
high fertility is everybody having an awesome job with great benefits
allowing them to be “flexible” for their family, but this just isn't
reality. As jobs, even “family-friendly” jobs, turn into careers, and
careers turn into essentially religious or spiritual vocations, family
is deprioritized and birth rates decline. In empirical studies of
surveys across nearly 100 countries, a co-author and I found that this
effect was actually as strong for men as for women, so this isn't just
about breadwinners. The boss in the movie “Elf”<i> </i>is the bad guy because as far as a child is concerned, a parent's work is <i>always </i>the biggest competition for that parent's mental and emotional energy.</blockquote><p></p><p><span>Another observation is that Trumpian racists tend to gain favor as birth rates <i>fall</i>, which obviously has ominous portents: <br /></span></p><p><span></span></p><blockquote>But as birthrates fall, far-right anti-immigration parties tend to do <i>better</i>,
not worse. So if a traditional value of being welcoming to immigrants
is something important to Americans, again, low fertility is a problem,
because it threatens the viability of political coalitions that support
an attitude of welcome and hospitality. And of course, in a more literal
sense, the absorptive capacity of a society with regard to immigrants
is related to population size: 1 million immigrants has a very different
social significance to a society with 100,000 births than a society
with 1 million or 10 million. </blockquote><p></p><p><span>Completing this downward spiral of falling birth rates mobilizing far-right ultra-racist groups is that low birth rates tends to quash innovation, too:</span><span><span> </span></span></p><p><span><span></span></span></p><blockquote>Another thing we appear to value is something like, “Having a
dynamic economy with lots of innovation and entrepreneurship, without
inherited wealth that dominates the economic landscape.” But I've <a href="https://www.aei.org/research-products/report/being-their-own-boss-a-review-of-american-demography-and-entrepreneurship/" rel="nofollow noopener" target="_blank">shown</a>
in extensive work that low birth rates directly predict less
innovation, lower entrepreneurship and a higher salience for inherited
wealth.</blockquote><p></p><p><span><span>America with all its problems has too far to go in fixing its broken society. It won't become much more livable anytime soon, so expect its birth rates to continue stagnating. <br /></span></span></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-24552627828326881672021-06-22T13:27:00.000+01:002021-06-22T13:27:51.226+01:00Happiest Country, Finland, Has Few Migrants<p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1_gRxgyLfoR8j3Me6Z7D7NzBf4ls1HTAB2QDuR4MyfnnCSsQoq1ru3f3hronhpybAgo2JeSGNZxJnmwIuWYA5LkeILdsjb8dQItWcdHBn6evvrrJUNTA5FH7LfKN3yQiRNxNfQmP_Wv0/s600/FinnishFarRight.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="405" data-original-width="600" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1_gRxgyLfoR8j3Me6Z7D7NzBf4ls1HTAB2QDuR4MyfnnCSsQoq1ru3f3hronhpybAgo2JeSGNZxJnmwIuWYA5LkeILdsjb8dQItWcdHBn6evvrrJUNTA5FH7LfKN3yQiRNxNfQmP_Wv0/w400-h270/FinnishFarRight.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Finnish far-right scares away many migrants... but how welcoming are ordinary Finns?<br /></td></tr></tbody></table> </p><p>There's this interesting conundrum in international migration of countries that, on paper at least, should be among the world's most attractive destinations having problems finding migrant workers. The rationale for this migration are well-known: Developed (and mostly Western) nations with high standards of living are aging, and generous state-provided benefits cannot continue when those being supported (retirees) are promised far greater resources than those being put into the system by current employees. The logical solution in theory is to attract migrant workers to fill this gap, but reality intrudes. </p><p>Take the case of <a href="https://www.straitstimes.com/world/worlds-happiest-country-seeks-migrants">Finland</a>. While it is near the top or tops global league tables for standards of living, paths for migrant workers remain treacherous. Let's begin with its dire population projections that necessitate more migrant workers coming in:</p><p></p><blockquote><p>While many Western countries are battling weak population growth, few are feeling the effects as sharply as Finland. With 39.2 over-65s per 100 working-age people, it is second only to
Japan in the extent of its ageing population, according to the United
Nations, which forecasts that by 2030 the "old-age dependency ratio"
will rise to 47.5.
</p><p>The government has warned that the nation of 5.5 million needs to
practically double immigration levels to 20,000 to 30,000 a year to
maintain public services and plug a looming pensions deficit.</p></blockquote><p></p><p>Despite its dire demographic situation, however, the country has done little to make itself more attractive and hospitable to migrant workers. While there is outright xenophobia in the form of far-right politics, what may be more concerning is that regular Finns do not really make much in the way of concessions to newcomers. As a result, those with high levels of "human capital" are no more likely to stay given the less-than-welcome reception they have received in Finland:<br /></p><p></p><blockquote><p>But anti-immigrant sentiment and a reluctance to employ outsiders <a href="https://www.straitstimes.com/world/europe/racism-intolerance-escalating-in-finland-council-of-europe" target="_blank">are also widespread in Western Europe's most homogenous society</a>, and the opposition far-right Finns Party regularly draws substantial support during elections...</p><p>But previous such efforts have petered out. In 2013, five of the eight Spanish nurses recruited to the western
town of Vaasa left after a few months, citing Finland's exorbitant
prices, cold weather and notoriously complex language. Finland has nonetheless seen net immigration for much of the last
decade, with around 15,000 more people arriving than leaving in 2019. But many of those quitting the country are higher-educated people, official statistics show.</p></blockquote><p></p><p>Horror stories are rife of even talented folks experiencing outright hostility:</p><p></p><blockquote><p>Start-ups "have told me that they can get anyone in the world to come
and work for them in Helsinki, as long as he or she is single", the
capital's mayor, Mr Jan Vapaavuori, said to AFP. But "their spouses
still have huge problems getting a decent job". </p>
<p>Many foreigners complain of a widespread reluctance to recognise
overseas experience or qualifications, as well as prejudice against
non-Finnish applicants. Mr Ahmed (who requested his name be changed for professional reasons)
is a 42-year-old Brit with many years' experience in building digital
products for multinational, household-name companies. Yet, six months of networking and applying for jobs in Helsinki,
where he was trying to move for family reasons, proved fruitless. "One recruiter even refused to shake my hand. That was a standout moment," he told AFP.</p></blockquote><p></p><p>As with Japan, the same question holds: <i>For how long can they hold on to such parochial attitudes in the face of such unfavorable demographic headwinds? </i></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-48482747258440903032021-05-23T19:44:00.003+01:002021-05-23T19:45:06.355+01:00Highly Subsidized US Industries: Horse Racing<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAXkSIpYDN3qboSnNDUdCetdM4Cb-hZ31HzDZEfg9-isEYjRN-BV4Mc4ngr_Bw4mdseN5FbMKM5y8y80Z2v3jvbBIVrMSr-YHbJkiNdhO-LHH504iPo7XMyS_CJepQwFirq1fF_rrvCKY/s770/medinaSteroid.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="433" data-original-width="770" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAXkSIpYDN3qboSnNDUdCetdM4Cb-hZ31HzDZEfg9-isEYjRN-BV4Mc4ngr_Bw4mdseN5FbMKM5y8y80Z2v3jvbBIVrMSr-YHbJkiNdhO-LHH504iPo7XMyS_CJepQwFirq1fF_rrvCKY/w400-h225/medinaSteroid.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Addled horses may be the least of horse racing's worries if the sport's subsidies take a hit.<br /></td></tr></tbody></table><p>As a casual follower of horse racing, I was intrigued by the legendary horse trainer Bob Baffert being <a href="https://www.cnbc.com/2021/05/17/bob-baffert-trainer-of-kentucky-derby-winner-medina-spirit-suspended-from-entering-belmont-stakes.html">barred</a> from participating in the third leg of the Triple Crown, the Belmont Stakes, due to doping. Baffert has already been cited for doping a number of times, but this time is the most noteworthy, just coming off a Kentucky Derby victory in the sport's most prestigious event. As it turns out, horse racing--in the United States at least--is a dying sport. if the pot of money being contested over keeps shrinking, well, that would help explain why even the most prominent trainers are tempted to turn the odds in their favor through underhanded means. </p><p>Unbeknownst to me, and I suspect most everybody else outside the industry, American horse racing circa 2021 cannot stand on its own... four legs. Probably by invoking nostalgia and tradition, the industry has managed to wangle massive state government <a href="https://defector.com/is-horse-racing-still-too-big-to-fail/">subsidies</a>: </p><p></p><blockquote><p>It’s a story rarely told outside the racing industry, and
understandably so: Horse racing is propped up by tax dollars from
casinos that have nothing to do with what happens on the track or at the
betting windows. Although the sport loses public interest with each
passing year, at least 24 states, almost three-quarters of those with
racing, directly <a href="https://horseracingwrongs.org/active-u-s-racetracks/" rel="noreferrer noopener" target="_blank">subsidize</a>
it with public funds. Based on publicly available information and
statistical analysis, the total is likely close to $1 billion annually.</p><p>New
York and Pennsylvania alone account for half of that amount; over the
last 15 years, they’ve distributed around $6 billion. Both states also
forgo countless millions each year in sales taxes they don’t charge on
racehorse purchases, an <a href="https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/racehorses.htm" rel="noreferrer noopener" target="_blank">exemption</a> that doesn’t apply to other kinds of horses.</p><p>Throughout
the country, horse racing has become so heavily subsidized that it
resembles a public enterprise. In Pennsylvania, for instance, the Race
Horse Development Fund is the state’s single largest economic
development program, and it funds nearly every aspect of horse racing,
from purses to support for breeders, health and pension benefits for
horsemen, drug testing of the horses, and even racetracks’ advertising
costs.</p></blockquote><p></p><p>Is horse racing too big to fail, in financial parlance? The emerging backlash is that these taxpayer dollars are going to an increasingly marginal pastime whose patrons are mostly the rich who can spare cash to gamble with when there are so many urgent social concerns:</p><p></p><blockquote><p>But the issue isn’t going away, especially not as the pandemic has
dynamited state finances, leaving lawmakers with tough decisions. This
February, [Pennsylvania governor] Wolf again included a cut to racing’s subsidy in his proposed
2021 budget. And last week, the editorial board of <em>The Philadelphia Inquirer</em> <a href="https://www.inquirer.com/opinion/editorials/race-horse-development-fund-pennsylvania-agriculture-gambling-slots-parlors-20210401.html" rel="noreferrer noopener" target="_blank">called</a> for the industry to be “put out of its misery.”</p><p>“It’s
like a giant party on the Titanic,” Ward said, “except the guests know
what is coming.” For racing’s dependence on public money, Pennsylvania
might be just the tip of the iceberg.</p></blockquote><p></p><p>The doping scandal will probably only raise more questions the industry would rather the general public be unaware of. Make no mistake: American horse racing, a pastime for the wealthy, is on the dole in a big way. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-9954445386623631322021-05-12T18:00:00.002+01:002021-05-12T18:00:57.661+01:00China-Oz Trade War: Higher Ed Next?<p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDjSbyENCLvSE2RTeC1SgeAuu5fxIUb-rfzHoCg9f8yTRnWeiR8UMvA3GSISvIuGYDpr1uuf8e6TGDtkkjz4g8Ny2qC_HfygFfgGC3qZQynIzaDzo6-XnA0edKzvhE6vk8z2ZbdA6YvD0/s1600/PRCstudentsOz.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="854" data-original-width="1600" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDjSbyENCLvSE2RTeC1SgeAuu5fxIUb-rfzHoCg9f8yTRnWeiR8UMvA3GSISvIuGYDpr1uuf8e6TGDtkkjz4g8Ny2qC_HfygFfgGC3qZQynIzaDzo6-XnA0edKzvhE6vk8z2ZbdA6YvD0/w400-h214/PRCstudentsOz.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Will PRC students soon be an increasingly rare sight on Aussie campuses?<br /></td></tr></tbody></table><p></p><p>Just when you thought China-Australia relations could get no worse, it seems they find something new to quarrel about. Perhaps the last golden goose Australia has left is its higher education sector, which still (rather amazingly) attracts scores of PRC students. That said, there appears movement afoot in China for recruiters to <i>not</i> promote Australia as a higher education. Anticipating matters may get worse (which is likely given how things are going between these two), Aussie universities are setting their sights on diversifying their international student base. </p><p>Researchers from the Australia National University in Canberra are <a href="https://7news.com.au/news/education/education-next-target-of-china-trade-war-c-2817263">urging</a> the government to get moving in making their country's universities less reliant on Chinese students:<br /></p><p class="css-1316j2p-StyledParagraph e4e0a020"></p><blockquote><p class="css-1316j2p-StyledParagraph e4e0a020">Dr Dirk van der Kley and
Dr Benjamin Herscovitch argue education is Australia’s only remaining
export valued over $10 billion annually which is “both reliant on China
and which Beijing can target without significant self-harm”. The
industry employs thousands of Australians, and is closely linked to the
country’s technological competitiveness, the pair say.</p><p class="css-1316j2p-StyledParagraph e4e0a020">Coercion against the sector would significantly impact Australia’s prosperity. “If
there was a significant drop in students from China, the revenue and
research loss would be impossible to fully replace through other
international markets because China is the largest source of globally
mobile students,” the authors write. The government would not be able to step in and fill that gap, they say.</p></blockquote><p class="css-1316j2p-StyledParagraph e4e0a020"></p><p class="css-1316j2p-StyledParagraph e4e0a020">Speaking of which, the Chinese government holds more cards in being able to harm Australia's economy given the economic importance of higher education service exports to the PRC and other nations: <br /></p><p class="css-1316j2p-StyledParagraph e4e0a020"></p><blockquote><p class="css-1316j2p-StyledParagraph e4e0a020">The
pair point out that media reports already indicate education agents in
some Chinese cities were discouraged from promoting Australia as an
education destination. Beijing could go
further, by fostering negative views of Australia and its universities
via the state-controlled media or even ceasing to recognise some or all
Australian qualifications.</p><p class="css-1316j2p-StyledParagraph e4e0a020">By recruiting more students from other locations, Australia could safeguard itself from Chinese coercion to a degree.</p></blockquote><p class="css-1316j2p-StyledParagraph e4e0a020"></p><p class="css-1316j2p-StyledParagraph e4e0a020">With both countries apparently <a href="https://www.cnbc.com/2021/05/06/china-says-it-will-suspend-economic-dialogue-mechanism-with-australia.html">not keen</a> on talking with each other to resolve economic and other differences, it will probably happen all of a sudden and without much warning if the PRC starts discouraging its students from going to Australia.<br /></p><p> </p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-68971785119528032242021-03-24T13:31:00.006+00:002021-03-24T13:31:45.546+00:00Greed is Good: UK COVID-19 Vaccine Edition<p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjBAPFy9LHIIRCQDjdhUjbJrlF32O8NtkfNdA9tR1nBDqkRGNMpTamI2nqe_oMZhzGYXpBPxJiMtUUd9F8Vv4G_MlJuJ0dOHZJS-zUgJQkAEiCa6F-Excvx6HCmz5CSIVFI6PM1kqSQ3wE/s976/VaxRates.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="686" data-original-width="976" height="281" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjBAPFy9LHIIRCQDjdhUjbJrlF32O8NtkfNdA9tR1nBDqkRGNMpTamI2nqe_oMZhzGYXpBPxJiMtUUd9F8Vv4G_MlJuJ0dOHZJS-zUgJQkAEiCa6F-Excvx6HCmz5CSIVFI6PM1kqSQ3wE/w400-h281/VaxRates.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Is the UK topping this table due to "greed" at the EU's expense?<br /></td></tr></tbody></table> </p><p>The height of 80s money worship is symbolized by the 1987 film <i>Wall Street</i> whereGordon Gekko, Michael Douglas' memorable character, reasoned that "<a href="https://www.youtube.com/watch?v=VVxYOQS6ggk">greed is good</a>." As a person who came of age during that decade, all I can say those were the days, my friends, even if I do not necessarily agree with the sentiment. Or has "greed is good" logic been consigned to the dustbin of history? Of all the darndest places, we are now being refamiliarized with the phrase in the age of COVID-19. Supposedly we're in this <a href="https://www.who.int/director-general/speeches/detail/who-director-general-s-opening-remarks-at-148th-session-of-the-executive-board">enlightened</a> age where getting everyone vaccinated is in everyone's interests. Given the increased global interconnections we have nowadays, not suppressing the virus in one part of the Earth means that all of us remain vulnerable. Or so that logic goes. </p><p>Now we have reports that UK Prime Minister Boris Johnson argued in private that "greed is good" when it comes to COVID-19 vaccinations. That is, the UK would not have controlled the spread of the virus in recent weeks had it not been <a href="https://www.reuters.com/article/us-health-coronavirus-britain-johnson-gr/capitalism-and-greed-gave-britain-its-vaccine-success-pm-johnson-says-idUSKBN2BF307">greedier</a> with allowing foreigners access to the vaccine:<br /></p><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x"></p><blockquote>Capitalism and greed gave Britain its success in vaccinating its
population, Prime Minister Boris Johnson told lawmakers in a closed
meeting, a remark that could rile up Brussels at a time when Britain
faces an EU threat to block vaccine imports. “The reason
we have the vaccine success is because of capitalism, because of greed
my friends,” The Sun newspaper quoted Johnson as telling Conservative
lawmakers on a Zoom meeting on Tuesday evening. Johnson then tried to row back and said: “Actually I regret saying it” and asked lawmakers repeatedly to “forget I said that”.</blockquote><p></p><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x">Needless to say, that statement is not playing well with other Europeans who are considered behind the UK in vaccinating their citizens. Witness the AstraZeneca vs. EU <a href="https://www.bbc.com/news/world-europe-56486733">row</a> over allowing vaccines made in the Netherlands to be exported to the UK (AstraZeneca has joint Swedish-British ownership). Fun times:<br /></p><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x"></p><blockquote><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x">Britain
has so far mounted the fastest COVID-19 vaccine programme of any big
country. But it now finds its programme threatened by the EU, which has
been far slower in rolling out vaccines and faces a third wave of
infections. The
European Commission is expected on Wednesday to extend powers to block
exports, a move that could hit supply of doses bound for Britain.
Johnson’s remarks come after a week in which British ministers have
tried to calm the row.</p><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x">Downing
Street declined to comment on Johnson’s remarks when contacted by
Reuters, but unidentified sources gave the BBC a bizarre array of
explanations.The
greed comment, according to the BBC’s political editor Laura
Kuenssberg, was apparently a joke about one of his cabinet colleagues,
Chief Whip Mark Spencer, who was gobbling a cheese and pickle sandwich
while the prime minister spoke.</p></blockquote><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x"></p><p class="Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x">Cheese and pickle sandwiches, Gordon Gekko... and COVID-19 vaccines. These are interesting times. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-80517917133344972682021-03-09T16:19:00.004+00:002021-03-09T16:20:56.383+00:00Hong Kong Booted From 'Economic Freedom' Rankings<p></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSPeGwLe8YoFD-q2XRl8OxYeKQLrSo3KBOjsZLC2i2n61xv4M6SBVRTaKHqwGY8fngngY0PnDUxwqmpB5_SXWicqDHmaC7mLjM5aPay1qE0QuYfiCV-jVMMs5fHDH5LC7nO2_cdiAMca8/s916/HK-e1466178949215-916x515.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="515" data-original-width="916" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSPeGwLe8YoFD-q2XRl8OxYeKQLrSo3KBOjsZLC2i2n61xv4M6SBVRTaKHqwGY8fngngY0PnDUxwqmpB5_SXWicqDHmaC7mLjM5aPay1qE0QuYfiCV-jVMMs5fHDH5LC7nO2_cdiAMca8/w640-h360/HK-e1466178949215-916x515.jpg" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Is Hong Kong circa 2021 ideologically closer to Mao Zedong than Milton Friedman? <br /></td></tr></tbody></table><p></p><p>Hong Kong used to be regarded as the world's shining example of the merits of free markets. No less than Milton Friedman--the most prominent libertarian thinker of his generation--<a href="https://www.youtube.com/watch?v=m0dfiWM-rsE">lauded</a> Hong Kong for its economic success due to following <i>laissez-faire</i> policies. Once upon a time, and for quite a long time, Hong Kong led the world in the ease of setting up and closing a business, allowing entrepreneurs manifold opportunities to come up with a formula to make it big. Government rarely made its presence felt back in the day.<br /></p><p>Like all good things, however, this success story had to come to an end. It used to be that Hong Kong routinely topped or ranked near the top of the arch-conservative Heritage Foundation's annual <a href="https://www.heritage.org/index/">Index of Economic Freedom</a>. To be sure, Hong Kong remains a gateway to Asia due to its proximity to mainland China. But, with respect to economic freedom, recent encroachments by the PRC into its running have given us this strange result: Hong Kong <i>isn't even being considered</i> here anymore thanks to seemingly endless PRC meddling in its political economy. Hong Kong is now <a href="https://www.hindustantimes.com/world-news/hong-kong-removed-from-annual-index-of-the-world-s-freest-economies-101614834533414.html">regarded</a> as a PRC satellite instead of an independent entity worthy of separate consideration:</p><p></p><blockquote><p>Hong Kong has been removed from an annual index of the world's freest
economies because the think-tank that compiles the league table said
the city was now directly controlled by Beijing. The announcement is a reputational blow for Hong Kong and comes as
Beijing ramps up its bid to quash dissent after huge and sometimes
violent pro-democracy demonstrations in 2019.</p>
<p>The Heritage Foundation, a conservative US think-tank, publishes an
annual Index of Economic Freedom ranking countries and territories for
how business-friendly their regulations and laws are. Over the last 26 years Hong Kong topped the table for all but one
year - a source of pride to the city's government which often used the
accolade in its official press releases and investment brochures.</p><div class="text-center stripes hidden-print margin-bottom-20"><div class="dfp-tag-wrapper" id="dfp-ad-imu1-wrapper">
<div class="dfp-tag-wrapper" id="dfp-ad-imu1">
</div>
</div></div>
<p>But when the 2021 ranking is released later on Thursday, Hong Kong
will not appear because the report's authors believe the city is no
longer independent enough of Beijing to justify separate inclusion. "The loss of political freedom and autonomy suffered by Hong Kong over
the past two years has made that city almost indistinguishable in many
respects from other major Chinese commercial centres like Shanghai and
Beijing," Edwin J Feulner, the founder of the Heritage Foundation, wrote
in the Wall Street Journal on Wednesday. </p></blockquote><p></p><p>And that's all she wrote. <br /></p>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.comtag:blogger.com,1999:blog-9031925921218676704.post-1026568179553089252021-02-17T10:07:00.002+00:002021-02-17T10:07:49.797+00:00After Qatar, Belligerent Saudi Takes on the UAE<p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0cWgso14vIMCgJIxhjFEWQKf1m6BmWAqtQKBZR4Tdo2Z2dqB-GAuePXL4xwTuWY_hvNEMs2-0WNkdG5DWqKL977yOSJK0i6w4iUndFTD6gSkOsgqF3iUOWF2w9ZWmrBXkiKzDbq6Buf8/s800/RiyadhSkyline.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="531" data-original-width="800" height="265" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0cWgso14vIMCgJIxhjFEWQKf1m6BmWAqtQKBZR4Tdo2Z2dqB-GAuePXL4xwTuWY_hvNEMs2-0WNkdG5DWqKL977yOSJK0i6w4iUndFTD6gSkOsgqF3iUOWF2w9ZWmrBXkiKzDbq6Buf8/w400-h265/RiyadhSkyline.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Will the <a href="https://www.youtube.com/watch?v=dgPZ4l9L1No">world go to Riyadh</a> if coerced to do so by the Saudi government?<br /></td></tr></tbody></table> </p><p>With friends like Saudi Arabia, who needs enemies? Upon taking power, Crown Prince Mohammed bin Salman was seen as a reformist, market-friendly leader able to take Saudi Arabia forward into a post-fossil fuel future. This impression has taken a big hit in recent years with the 2017 <a href="https://apnews.com/article/qatar-saudi-arabia-united-arab-emirates-kuwait-dubai-0a09c370d8430b93d32e403aaf4d3f2a">embargo</a> on Qatar as well as the still-unresolved 2018 murder of journalist <a href="https://www.bbc.com/news/world-europe-45812399">Jamal Khashoggi</a> at Saudi Arabia's Turkish consulate. Taking endless potshots at its fellow Gulf Cooperation Council (GCC) members doesn't seem to be the way to signal that Saudi Arabia is open for business. </p><p>More recently, Saudi Arabia has come up with its most <a href="https://www.cnbc.com/2021/02/16/targeting-dubai-saudi-arabias-ultimatum-to-pull-hq-offices-to-kingdom.html">outlandish</a> power play yet: It has cautioned multinationals that, unless they place their regional (read: Middle East) headquarters in Saudi Arabia, they will not be able to ink government contracts. Obviously aimed at Dubai in the UAE which vastly outstrips Saudi Arabia in "ease of doing business" indicators that you would naturally think companies would gravitate to when siting regional headquarters, the outcry has been understandably strong:</p><p></p><blockquote><p>Saudi Arabia, in a bold and unexpected move, <a href="https://www.spa.gov.sa/viewfullstory.php?lang=en&amp;newsid=2191782#2191782" target="_blank">announced late Monday</a>
that by 2024 its government would cease doing business with any
international companies whose regional headquarters were not based
within the kingdom. </p><p>The news has investors, bankers and expat workers buzzing — and scratching their heads. </p><span></span><p>Saudi
Arabia in recent years has pitched itself as a location for HQ offices
in its campaign to create private sector jobs and diversify its economy
as part of Crown Prince Mohammed bin Salman’s Vision 2030.</p><p>But
what began as a pitch to global head offices has now become an ultimatum
for some: either relocate your headquarters to the kingdom, or lose out
on lucrative government contracts. And the move, Middle East analysts
and finance professionals say, appears to be targeted at the region’s
current headquarters hub: Dubai. </p></blockquote><p></p><p>Mind you, the UAE joined Saudi Arabia in the embargo on Qatar. Although regional economic rivalry is expected, punching below the belt in this way over restricting government procurement lest they headquarter in Saudi Arabia is widely perceived as unfair, especially since they are all supposedly part of a <a href="https://www.gcc-sg.org/en-us/CooperationAndAchievements/Achievements/EconomicCooperation/TheCustomsUnion/Pages/Practicalproceduresfortheestab.aspx">customs union</a> in the GCC:</p><div class="group"><p></p><blockquote><p>The Saudis are “trying to lure companies out of
Dubai, I expect, and elsewhere,” Ryan Bohl, a Middle East analyst at
risk consulting firm Stratfor, told CNBC. One
UAE-based financier, who spoke anonymously due to having business
operations in Saudi Arabia, described the move as “clearly targeting the
UAE” and a “jab in the face” to Dubai.</p><p>“It’s a terrible
decision,” the financier, a longtime veteran of the region, added. “It’s
anti-common market, it’s anti-competition, and it’s essentially
corporate bullying.”</p></blockquote><p></p><p>The truth of the matter is that Saudi Arabia is a less attractive place to site your regional HQ with its more restrictive environment--economically and socially. The latter is of particular concern to Western expats:</p><blockquote><p>The government aims to significantly increase Saudi Arabia’s current share of less than 5% of the region’s HQ offices...</p><p>But will that be enough to lure expats out of Dubai, where they can
drink, wear bikinis on the beach and enjoy a far more liberal lifestyle,
comparable on many levels to the West? <br /><br />“The lifestyle in Saudi
is not comparable,” said one Dubai-based venture capitalist, speaking
anonymously due to professional restrictions. “You don’t have the same
freedoms you have here — here I can go on a public beach and hang out
... Dubai is a global city, Riyadh is far from that. It lacks the
diversity that Dubai has. That’s a big deal for me.” <br /></p><p>Indeed, one of Dubai’s allures for foreigners is its majority expat
population — 90% across the UAE as a whole. The success of Dubai’s
global openness model manifests itself in numbers as well: according to
the U.N.’s trade database, the UAE in 2019 received 300% more foreign
direct investment than Saudi Arabia, despite its economy being about
half the size.<br /><br />And the UAE ranked 16th on the World Bank’s 2020 Ease of Doing Business Index, while Saudi Arabia ranked 63rd.</p></blockquote><p>Speaking of government contracts, the lure is unmistakable: a supposed $220 billion that Saudi Arabia states it will spend to make Riyadh a global city (comparable to *gulp* Dubai). What's more, there are those who say Saudi Arabia is actually coming on in leaps and bounds:<br /></p><p></p><blockquote><p>The Saudi government is investing $220 billion in projects aimed at
putting Riyadh in the world’s top 10 city economies, and is offering
competitive tax-free salaries to employees willing to relocate there...</p><p> Still, many expats who’ve worked in the kingdom feel differently.
“There’s no doubt that Saudi will compete with Dubai,” said Alex Nasr, a
consultant with several years of experience working around the country,
adding that it’s already competing on the salary front. <br /><br />“Now
with Vision 2030 and the radical changes the nation is pushing through,
it will begin catching up on the quality of life front … as soon as the
veil is lifted on the lifestyle restrictions, the expats will begin to
pour in.”</p></blockquote><p></p></div>Emmanuelhttp://www.blogger.com/profile/04615366847433704476noreply@blogger.com