Consulting Network » china http://www.consultingnetwork.co.in Fri, 13 Jan 2012 04:39:53 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Beijing is well-positioned to weather global economic storm – Bain & Company http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/#comments Mon, 20 Apr 2009 17:47:26 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=692
Boston-based management consultants Bain & Company believes in gauging success in terms of their clients’ financial results. It can’t be otherwise as the company very often accepts rewards in the form of equity in the firms it advises. In an interview, Steve said anything the Indian government could do to drive liquidity into the market is very essential now.

What is your take on course of the global economy in the near to medium term? Have we begun seeing early signs of a turnaround?

Anyone venturing to make specific predictions on the global economy now would clearly be putting himself at great risk. The fact is, we’re witnessing absolutely unprecedented levels of turbulence and uncertainty. Latest estimates are that global GDP would contract by 0.5-1% in 2009.

The magnitude of the current downturn is far greater and it is also much more pervasive than other worldwide recessions in the past 30-40 years. The leading indicators are relatively useless at this juncture.

India, despite its exports-imports to GDP ratio being not very high, is seriously impacted by the crisis.

Obviously, India is not insulated from the global crisis. It can’t be. There is a serious slowdown in India’s exports and the FDI inflows are also adversely affected. Together, these account for a significant portion of the GDP. Frankly, relative to many other countries, the challenge to employment growth posed by the crisis is more serious for India because 15 million enter the country’s job market every year.

This is a unique challenge. So, anything the government can do to drive liquidity into the market is essential. In addition to coaxing banks to lend, the government also needs to take steps to boost the corporate bond market.

With the high fiscal deficit, there is little space left for providing fiscal boost to the economy but there is still room for monetary easing. Banks here are at best supporting working capital needs of companies, much akin to how their counterparts in Germany, UK, Brazil, Japan etc are behaving these days.

Because of herd behaviour among potential lenders, credit is simply not forthcoming for major capital investments, which is necessary for overcoming the crisis. There is a glaring absence of risk appetite among the lenders, despite plenty of money in the global system. The money is not finding its way from the lenders to the people who need capital. It is also the question of dearth of borrowers in markets affected by dampened demand.

How feasible is to enhance intra-Asia trade in an expedient manner to partly offset the impact of decline in demand in the west on the aggregate demand for Indian goods and services?

Intra-Asia Pacific trade should be a priority for policymakers here. But given the level of purchasing power of the consumers in the region where half of the world population live, any plausible increase in intra-Asia Pacific trade would not make up for the western slump. A retreat to regionalism is not the solution. What is required is more rapid acceleration of the world trade.

West’s protectionism could undermine the ability of countries to salvage economies.

Reneging on the promise of liberalising the world trade is good for none. There may be instances of some (protectionist) legislations in the US. But I hope this would not constitute a trend. Protectionism will doubtless impair the ability of economies to come out of the recession.

The current crisis has goaded the governments and regulators in the world to collaborate and coordinate. Much more synchronised banking regulation, which the crisis has enabled, will provide long-term benefit to the global economy in terms of an increased ability of financial sector regulators to take concerted, swift actions to defuse and pre-empt crises.

So, even though it might sound ironical, the improvement in the quality and effectiveness of regulatory interventions is a positive outcome of having a crisis of such magnitude and spread. The G20 meeting beginning in London from April 2, I hope, would be marked by a definite plan for reviving the world economy and prompt follow-up action.

How able is China to weather the storm?

I’m pretty bullish on China’s ability to withstand the crisis. The combination of political communism and economic capitalism that China has adopted as a strategy is working for that country. Export contribution to Chinese economy might be bigger than of many other countries, but with its huge reserves and rapidly growing middle class, Beijing is well-positioned to weather any storm without major dislocations.

Chinese authorities exercise much greater control than their counterparts in most other countries and are in a position to provide fiscal stimuli to the economy in ample measure. Frankly, China’s ability to provide centrally managed fiscal incentives to the economy and thereby prop up demand is enviable. Of course there is the question of finding employment for those migrating to the urban areas.

To get them employment, the country need to have at least 8-9% growth. During these turbulent times, one concern of Beijing could be about $1 trillion of its nest eggs invested in US treasury securities.

Source: Economic Times


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]]> http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/feed/ 0 To Get Rich isnt always so glorious: Variables and Environment in China Negotiations http://www.consultingnetwork.co.in/to-get-rich-isnt-always-so-glorious-variables-and-environment-in-china-negotiations/490/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/to-get-rich-isnt-always-so-glorious-variables-and-environment-in-china-negotiations/490/#comments Mon, 16 Mar 2009 10:48:37 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=490 By Andrew Hupert

In 1978, Deng Xiaoping ushered in the era of New China with his trip to the South and one of the most famous slogans that may never have been uttered – ‘to get rich is glorious’. At the time, China was a poor nation with relatively limited impact on the global economic structure.

In 1995, First Lady Hillary Clinton arrived in China to challenge Beijing to respect the human rights of women and aids victims, declaring, “Women’s Rights are Human Rights and Human Rights are Women’s Rights”. She demanded the China’s leaders stop repressing the rights of minorities, religious and women.

2007 – Candidates Hilary Clinton and Barrack Obama co-sponsor a bill threatening Beijing with sanctions and punishment if they don’t stop manipulating the rmb – a de facto barrier to trade.

On her recent trip Sec of State HRC again challenged Beijing – to buy more treasury bonds.

What happened?

In negotiating terms, we are witnessing how shifts in environment dictate changes in variables – and attempts to alter the negotiating agenda.

HRC has led the new administration’s charge to rewrite the agenda of China-Western negotiation. She introduced a phrase that we’ll all be hearing a lot from now on. “We are all in this together”.

Students of negotiation can draw 5 important lessons from this shift in negotiating tactics.

Lesson 1: Variable selection is key to successful negotiation. Variables are really nothing more than a carefully articulated list of your goals. If you don’t ask for it, it is unlikely that you will get it. The US’ #1 variable right now is to involve China DIRECTLY in the global economic recovery. Treasury purchases, increased overseas investment, a richer RMB and open trade are the new key variables. Human rights and democracy are the new ‘throw-aways’.

Lesson 2: The negotiating environment can’t necessarily be changed – but it can be monitored and analyzed to develop relevant variables and priorities. We are seeing two environment shifts – China’s long-term rise in wealth, influence & power AND a global recession. Politicians on both sides of the Pacific must adjust to the shifts or be left behind. Protectionist Americans and xenophobic Chinese are both in danger of being outflanked in their own INTERNAL negotiations. See LIM discussion

Lesson 3: Agendas must be negotiated. They are the key to successful negotiation. Mrs. Clinton is trying to alter the negotiating agenda by introducing the concept of ‘shared fate’ and cooperation. 10 years ago this would have been laughable – but now that it’s on the table it will be tough to remove. Look for Chinese leaders to talk more about “China helping the world by remaining strong and focused on China”. It will be a difficult bargaining point for them to win.

Lesson 4: Power Balance shifts – and weakness quickly turns to strength and vice versa. Remember when China was head of the non-aligned bloc and taking strength from the moral high ground of poverty and righteous struggle? Suddenly China has become the rich kid living in relative luxury — and being asked to help out others. Who was it that talked about the weak overcoming the strong? Lao Tse, and to a lesser degree, Sun Tse. Chinese politicians used to take comfort from this notion – now it has turned around on them.

Lesson 5: Be careful what you ask for. You may get it. From Mao to Deng to Jiang, modern Chinese leaders have demanded respect and their rightful place on the world stage. Now now that China has achieved it Hu and Wen will have to manage it. You’ll notice that present day Chinese leaders no longer talk about China deserving a seat at the table. It’s looking like a very expensive chair.

Beijing and it’s conservative elements are coming under increasing stress to change their behavior and grant concessions – due to their successes and the failures of their counter-parties. This is often the case in negotiations where power balance shifts rapidly. We are seeing the same thing in relationships between buyers and sellers as shortages disappear & buyers become scarce

About the Author

Andrew has spent the past six years lecturing and consulting (negotiation, sales management) in Shanghai. Before making Shanghai home, he has worked in Taipei and HK (banking) and on the China desk in NY (WICO, Paribas). He is a regular lecturer at New York University’s Sanghai Campus (with East China Normal). His specialty is international negotiation.

Andrew first came to Asia in 1990 after receiving his MBA in International Finance from New York University Stern School of Management. He gained extensive senior sales and management experience with leading financial institutions in Taipei, Hong Kong, Kyoto and New York before he set up full time as an independent consultant and trainer in Shanghai.


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