Unmade in China

Sticking to the last: shoe production in Wenzhou, known as China’s most entrepreneurial city but now hit by a fall-off in export demand

Juyi Shoes is the sort of entrepreneurial company that has helped turn China from a poor rural country into a manufacturing powerhouse. In 1988, Li Anlian borrowed money from relatives to start a workshop making shoes from spare bits of leather. Managed these days by her son, the company now employs 3,800 and produces 10m pairs a year for clients that include Zara of Spain.

Many of Ms Li’s neighbours have similar stories. Juyi is based in Wenzhou, a city 250km south of Shanghai whose resilient entrepreneurs have made it the standard-bearer of China’s private-sector economy. By some estimates, the city has 300,000 small businesses.

But there is one thing about Juyi that does not quite chime with Wenzhou’s reputation for rugged individualism. An entire floor of the company’s office is given over to celebrating the Chinese Communist party and one of the rooms for party members boasts six imposing framed portraits: in order, Marx, Engels, Lenin, Stalin, Mao, Deng.

China this week celebrates the 30th anniversary of its “reform and opening up” policy, when Deng Xiaoping loosened controls on the economy and unleashed a long stretch of high-octane growth that has pulled tens of millions out of poverty. Concerts, seminars and speeches will mark the event.

Yet the anniversary is taking place during a period of soul-searching about whether the impressive run of growth can continue and whether Chinese capitalism can survive its deep contradictions. In the short term, Wenzhou is a useful weather vane for the health of the global economy and the strength of consumer demand. A slump in export hubs such as Wenzhou means depressed consumers elsewhere. Beyond that, the fate of Wenzhou’s entrepreneurs will be an important test of China’s ability to move on from low-cost manufacturing and build a more sophisticated economy.

The immediate threat is from the global slowdown – news that Chinese exports declined in November heralds tough times ahead. But the weak economy has also reignited a debate about whether the entrepreneurial dynamism at the root of China’s success is being stifled by the remaining government controls over the economy. After three decades of reforms, the financial system is still dominated by the party-state, which means that funding often follows political connections rather than business acumen.

“China’s financial system has not opened up enough,” says Yao Xianguo, dean of the College of Public Administration at Zhejiang University. “Big private companies increasingly rely on the government while smaller firms suffer from their inability to get loans from state-owned banks.”

Wenzhou helps demonstrate how capitalism flourished from nothing after Deng took over. Little known outside the country, the city is legendary within China – evidenced by the many explanations for its success. Isolated by mountains on three sides, Wenzhou businesses just got on with it, some people say, at a time when Beijing still frowned on capitalism.

Some also say Mao refused to put important state-owned companies in the region because its location across the strait from Taiwan made it vulnerable to invasion, meaning it had to create its own economic base. Churches with red neon crosses dot the city’s skyline, prompting theories that Wenzhou’s business culture is rooted in a form of protestant individualism.

Whatever the reason, the city’s factories have become a global force in light manufacturing. For anyone who uses a cigarette lighter, there is a 70 per cent chance it was made in Wenzhou. Something similar goes for light switches, zippers and even sex toys. Nearby towns are big producers of hinges, plugs, bras, socks and ties.

Tales of cunning entrepreneurs abound. Nan Cunhui repaired shoes until he and a few friends started to make light switches from spare parts in the evenings. From that he has built up Chint, China’s biggest manufacturer of electrical power equipment, with sales of $2.3bn (£1.5bn, €1.7bn) a year. (One of his friends in the early business left to found his own company, Delixi, which is now the second biggest Chinese company in the industry.)

“The interesting thing is that the guys at Chint and elsewhere started off as peasants and have got where they have all on their own,” says Xie Jian, professor at Wenzhou University’s City College. Manufacturing success, he argues, has often come despite rather than because of the authorities in Beijing: “The companies have always been one step ahead of the government.”

Wenzhou’s private sector is also rooted in the city’s network of informal banks. Many of the factories got off the ground using money raised by a handful of relatives and family friends from underground banks, which exist in a legal grey area, tolerated but not formally approved by the authorities. This combination of light manufacturing and extended-family microfinance can be found elsewhere in China in smaller versions but it is often referred to as the “Wenzhou model”. Yet that model is under pressure. As exports drop off, low-cost manufacturing companies are particularly feeling the pinch.

Gaining an accurate picture of what is happening to Wenzhou’s industry is difficult – there have been few reports of bankruptcies among companies or underground banks, unlike the export hub in Guangdong in southern China. But Zhou Dewen, head of the association that represents the city’s small and medium-sized companies, says production has stopped or been cut at 20 per cent of Wenzhou’s factories, while exports have fallen 15 per cent this year.

“We have actually had a very strong year but the impact from the crisis is only just beginning,” says Lin Kefu, vice-president of Chint.

In Shuangyu, a Wenzhou suburb where the narrow streets once hummed with small workshops making shoes, the signs of the slowdown are visible – closed doors at some and large piles of inventory at others. Ye Yonglin, who owns Dilun Shoes, says that most of the factories have had to cut back. “If you are a small company and do not have regular contracts with clients or some edge in terms of quality or branding, you are suffering badly at the moment,” he says.

Building a brand and investing in technology cost money, however, and that is where the slump among Wenzhou manufacturers collides with one of the biggest debates about the future of economic reforms in China.

The Wenzhou model of informal financing, though useful for starting factories from scratch, is not so effective at taking companies to the next stage. Not only do loans in the informal market tend to be small but interest rates are also high – borrowers can pay as much as 40-50 per cent a year.

Formal finance in China is dominated by the state. The main commercial banks provide the bulk of the credit in the country and they mostly lend to other state-owned companies. So as private businesses grow and require more capital or land, some feel the need to get close to the various arms of the party-state.

In Wenzhou, this has led to an odd courtship over the last decade: companies looking for official patrons and the Communist party, nervous about the creation of a new power base, seeking to penetrate the private sector. The homage to the party and Stalin at Juyi Shoes is one example, but Chint boasts it was the first Wenzhou company to set up a party cell, even if founder Nan Cunhui has not been accepted as a party member. State media reported last year that 3,400 party cells had been established in Wenzhou businesses.

Forging close contacts with government is good business in any country – witness the photos of handshakes with the president-of-the-day in US executive suites. But for Yasheng Huang, a professor at MIT and author of a new book, Capitalism with Chinese Characteristics, it is part of a broader trend of the party-state smothering the country’s entrepreneurial instincts. The problem is not the photos with senior leaders, he says, but all the backroom deals that entrepreneurs have to enter if they want political protection.

According to Prof Huang, China has not seen a gradual transition from state control to capitalism over the last three decades. Instead, the real boom in entrepreneurship came in the 1980s when controls in rural areas were relaxed. But since the 1990s, the state has reasserted more control over the nascent private sector and focused more on government-led urban investment. By starving private companies of funding, he argues, China is risking a decline in its productivity that will damage future growth.

“One of the reasons Wenzhou is now in trouble is that the companies do not have enough capital to modernise,” he says. “China today resembles an oligarchic version of state-led capitalism” which could become “crony capitalism built on systemic corruption and raw political power”.

Prof Huang’s thesis has its critics, who point out that policies such as joining the World Trade Organisation in 2001 did a huge amount to stimulate the private sector. But his book has come at a time of intense debate within China about liberalising the financial sector – including tentative proposals for legalising underground banks.

The idea is opposed by some of the big state-owned banks, which fear more competition, and by some officials who worry it could lead to an explosion in new bank credit. There is also ideological opposition to ceding more state control of finance. But supporters say it will provide a shot in the arm to the economy at a crucial time by providing more and cheaper credit to well-run smaller companies.

“One of the most important things the government could do to help the economy is to legalise the underground banks,” says Mr Zhou from the small companies association in Wenzhou.

China’s leaders will rightly boast this week about the economy’s achievements over the last three decades. Yet if they are to sustain that growth record, they face some tough questions about just how much of the commanding heights of the economy they wish to keep controlling.

OPENING UP: LAND AT THE HEART OF REFORMS

At a Communist party meeting on December 18-22 1978, Chinese leaders took the first steps away from collective agriculture. In official histories, the meeting began the transition from a command economy, which later became known as “reform and opening up”.

In fact the timeline is a little hazy. Many of the decisions had actually been taken at a separate meeting the month before and peasants in Anhui province had already started dividing up communal land among themselves. But the December meeting has gone down in history as the victory of Deng Xiaoping (left) over the Maoists.

In the following three decades, China introduced a series of further reforms – most products are now based on market prices, swaths of state-owned companies have been privatised and China joined the World Trade Organisation in 2001. Liberal economists have called for two further totemic reforms – allowing farmers to use their land as collateral and reducing state control of the financial system.

Copyright The Financial Times Limited 2008

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Author: Geoff Dyer
Original Source: Financial Times
Date Published: December 16 2008
Web Source: http://www.ft.com/cms/s/0/e8cd9db2-cba3-11dd-ba02-000077b07658,s01=1.html
Date Accessed Online: 2008-12-20

China kills chickens to frighten monkeys

BEIJING - The recent arrest of Chinese dissident writer Liu Xiaobo after he took part in a high-profile signature campaign that calls for more freedoms and political reform is a sign that human-rights issues still touch a raw nerve with the Chinese government.

Liu, a prominent critic of the Chinese government who was imprisoned for 20 months for participating in the 1989 Tiananmen pro-democracy movement, was taken away by police on December 8 - shortly after "Charter 08" was circulated online to mark International Human Rights Day and the 60th Anniversary of the Universal Declaration of Human Rights.

A week later, his whereabouts remain unknown and his wife is still denied access to him, even though Chinese law requires police to notify the families of detainees within 24 hours.

On the same night, another prominent signatory of the declaration, Zhang Zuhua, a constitutional law expert, was detained for 12 hours on suspicion of "inciting the subversion of state sovereignty".

As of this week, dozens of others across China who have also signed the declaration have been interrogated by authorities, according to rights activists.

Charter 08, initially signed by over 300 intellectuals including lawyers, academics, writers and artists, appeals to the Chinese government to launch widespread political reform, such as granting its citizens speech and religious freedoms, respecting human and civil rights and establishing an independent judiciary, as well as ending its one-party rule.

And thousands of others have added their names to the petition since then, with signatures soaring beyond 5,000 as of this week, according to China Human Rights Defenders, a network of domestic and foreign human rights activists.

According to his lawyer, Mo Shaoping, Liu was probably detained because authorities considered him a chief organizer of the signature campaign.

His arrest and the harassment of other signatories have drawn concern from Western governments and international human-rights groups. Last week, the US State Department said it was "deeply concerned" about Liu's well-being as well as that of other Chinese citizens who have been interrogated for peacefully expressing their desire for greater freedoms.

A statement from the French European Union presidency this week also expressed "deep concern" at Liu's arrest and urged China to reveal the reason for Liu's detention and to respect his rights.

Gao Yu, a dissident writer, said she believed the authorities were nervous that the appeal might trigger a massive call for democracy that will spill over to next year, the 20th anniversary of the 1989 Tiananmen crackdown, and spark a fresh round of democratic movements.

"They are using Liu to warn other people against taking action over June 4," said Gao, who was herself questioned by police over her signing of Charter 08 last week.

Xu Youyu, a retired professor of the Chinese Academy of Social Sciences, said authorities over-reacted to what was a peaceful expression of opinions.

"I think this shows that the political atmosphere is very tense," he said. "I think the authorities' move is irrational and is hard to understand ... it is not a wise move."

Xu, a signatory himself, said none of the demands in Charter 08 posed a challenge to the government and warned that the over-reaction would likely prompt more people to get involved.

Bao Tong, a former aide of ousted reformist leader Zhao Ziyang, who lives under continuous surveillance, said the authorities' nervous reaction to Charter 08 shows just how badly China needs to make those changes for which the appeal is calling.

"This itself proves that Charter 08 is very necessary, because there is no rule of law, no citizens' rights, no democracy in China," said Bao, who was arrested just before the Tiananmen crackdown and jailed for seven years. "This was just a minor thing and now it's totally overblown - this is a very foolish move."

Nicholas Bequelin, senior researcher at the New York-based Human Rights Watch, said the unprecedented unity shown by such a large number of prominent citizens across the country had alarmed the authorities, who feared their movement might trigger broader demand for political change.

"My concern is that the authorities want to make an example of Liu Xiubo ... I think the statement is that they want to scare the intellectuals,” Bequelin said. "This is the old trick of killing a chicken to frighten the monkeys."

Just the reverse, "It might damage the party's ability to bring these people to their party. It just shows how arbitrary and brutal the party can be," Bequelin said.

But if the arrest of Liu is designed to put off others, it has not succeeded so far. Rights activists say more than 1,200 have signed an open letter circulating on the Internet calling for his release and over 5,000 have signed Charter 08, with the number increasing every day.

Liu, a former literature professor, has long been seen as a thorn in the side of the Chinese authorities for his articles that are openly critical of the government. After Liu's release from prison in 1991 for his Tiananmen pro-democracy movement involvement, he was closely watched by the authorities and was often put under house arrest around sensitive dates such as the anniversaries of the June 4 Tiananmen crackdown.

He was detained for three years in a "Re-education through Labor" camp between 1996 and 1999 for criticizing the Chinese government. Prior to the 19th anniversary of the Tiananmen crackdown this year, he was warned by the authorities against writing commemorative articles and was detained for a couple of hours on that day.

Cyber dissident Liu Di said the Chinese government had done itself a disservice by arresting Liu Xiaobo. "I think the arrest of Liu Xiaobao is like dropping a stone onto your own feet," said Liu, who was also questioned by state security agents for calling for Liu Xiaobo's release. "If they hadn't done that, the issue wouldn't have drawn so much attention."

Verna Yu is a freelance journalist from Hong Kong.

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Author: Verna Yu
Original Source: Asia Times
Date Published: Dec 20, 2008
Web Source: http://www.atimes.com/atimes/China/JL20Ad01.html
Date Accessed Online: 2008-12-20

Global economy: The age of obligation

In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.

This point is spelt out in Deuteronomy: “Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.”

Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders.

The idea of a generalised debt cancellation is not wholly unknown in modern times. The late Gerald Feldman, the world’s leading authority on the German hyperinflation of 1923, drew a parallel between the ancient Hebrew yovel and the wiping out of all paper mark-denominated debts as a result of the collapse of the German currency (though, as he was quick to point out, those whose savings were wiped out were far from jubilant).

In the hope of avoiding the mark’s meltdown, the economist John Maynard Keynes had repeatedly called for a general cancellation of the war debts and reparations arising from the first world war. Though no such intergovernmental jubilee was ever proclaimed, debt cancellation was effectively what happened after 1931, beginning with President Herbert Hoover’s one-year moratorium on both war debts and reparations.

As 2008 draws to a close, there are many people on both sides of the Atlantic who yearn for such a simple solution to the problem of excessive indebtedness. Parallels with the interwar period are not inappropriate. It is all but inevitable that we shall see serious political and geopolitical upheavals in 2009, as the recession takes its toll on weak governments (Thailand and Greece are already reeling) and raises the stakes in inter-state rivalries (India-Pakistan). In the words of Hank Paulson, the US Treasury secretary: “We are dealing with a historic situation that happens once or twice in 100 years.” The stakes are high indeed. Has the time arrived for a once-in-50-years biblical jubilee?

Excessive debt is the key to this crisis; it is the reason we are confronting no ordinary recession, curable by a simple downward adjustment of interest rates. It is the reason we still have to fear, if not a second Great Depression, then very likely the biggest recession since the 1930s. We are living through the painful end of an age of leverage which saw total private and public debt in the US rise from about 155 per cent of gross domestic product in the early 1980s to something like 342 per cent by the middle of this year.

With average household debt rising from about 75 per cent of annual disposable income in 1990 to very nearly 130 per cent on the eve of the crisis, a large proportion of American families are submerging under the weight of their accumulated borrowings. British households are in even worse shape.

Looking back, we now see just how big a proportion of US growth since 2001 was financed by mortgage equity withdrawals. Without that as a means of financing consumption, the economy would barely have grown at 1 per cent a year under President George W. Bush. Looking forward, we see just how hard it will be to stabilise property prices and the prices of the securities based on them. Already, at the end of September, one in 10 American home owners with a mortgage was either at least a month in arrears or in foreclosure. One in five mortgages exceeds the value of the home it was used to purchase.

The financial sector’s debts grew even faster as banks sought to bolster their returns on equity by “levering up”. According to one recent estimate, the total leverage ratios (on- and off-book assets and exposure divided by tangible equity) for the two biggest US banks were 88:1 for Citibank and 134:1 for Bank of America. The bursting of the property bubble caused such ratios, which were already too high on the eve of the crisis, to explode as off-balance-sheet commitments and pre-arranged credit lines came home to roost. Only by borrowing from the Federal Reserve on an unprecedented scale have the banks been able to stay in business.

With estimates of total losses on risky assets now ranging from $2,800bn (£1,850bn, €1,960bn) to $6,000bn, a chain reaction is under way that will leave no sector of the world economy untouched. The American economy is contracting at an annualised rate of 5 per cent. Commercial property is following the residential market into freefall. The Standard & Poor’s 500 index is down 43 per cent since its peak in October last year. The market for credit default swaps is pointing to a surge in defaults on corporate bonds. The automotive industry is already (against the will of Congress and the original intention of the Treasury) on life support. The US is at the centre of the crisis but Europe and Japan may suffer even larger aftershocks. As for the much feted emerging market “Brics” – Brazil, Russia, India and China – their stock markets have been dropping like, well, bricks.

What makes this crisis of burning interest to financial historians is the knowledge that we are witnessing a real-time experiment with not one but two theories about the Depression.

On one side, Ben Bernanke, Fed chairman, is applying the lesson of Milton Friedman’s and Anna Schwartz’s A Monetary History of the United States, which argued that the Depression was in large measure the fault of the central bank for failing to inject liquidity into an imploding financial system. Mr Bernanke has not merely slashed the federal funds rate to below 0.25 per cent. He has lent freely to the banks against undisclosed but probably toxic collateral. Now he is buying securities in the open market.

The result has been an explosion of the Fed’s balance sheet and of the monetary base. With assets approaching $2,263bn and capital of less than $40bn, the Fed increasingly resembles a public hedge fund, leveraged at more than 50:1.

On the other side, Mr Paulson has emerged as an unwitting disciple of Keynes, running a huge government deficit in an effort not merely to bail out the financial sector but also to provide a public sector substitute for sharply falling private sector consumption. Even before President-elect Barack Obama launches his promised infrastructure investment programme, estimates of next year’s deficit run as high as 12.5 per cent.

Once, monetarism and Keynesianism were considered mutually exclusive economic theories. So severe is this crisis that governments all over the world are trying both simultaneously.

Although commentators like to draw parallels with Franklin Roosevelt’s New Deal, in truth the measures taken since the crisis began in August 2007 more closely resemble those taken during the world wars. After 1914, and again after 1939, there was massive government intervention in the financial system. Banks and bond markets were reduced to mere channels for the financing of huge public sector deficits. That is what is happening today, but without the stimulus to manufacturing that the world wars provided. We are having war finance without the war itself.

Yet the effect of these policies is essentially to add a new layer of public debt to the existing debt mountain. Added together, the loans, investments and guarantees made by the Fed and the Treasury in the past year total about $7,800bn, compared with a pre-crisis federal debt of about $10,000bn. The Treasury may have to issue as much as $2,200bn in new debt in the coming year.

For the time being, the distress-driven demand for dollars and risk-free assets is pushing down the cost of all this borrowing. Treasury yields are at historic lows. But it is not without significance that the cost of insuring against a US government default has risen 25-fold in little over a year. At some point, with most big economies adopting the same fiscal policy, global bond markets are going to start choking.

Is it really plausible that the cure for excessive leverage in the private sector is excessive leverage in the public sector? Might there not be a simpler way forward? When economists talk about “deleveraging” they usually have in mind a rather slow process whereby companies and households increase their savings in order to pay off debt. But the paradox of thrift means that a concerted effort along these lines will drive an economy such as that of the US deeper into recession, raising debt-to-income ratios.

The alternative must surely be a more radical reduction of debt. Historically, such reductions have been done in one of four ways: outright default, restructuring (for instance, bankruptcy), inflation or conversion. At the moment, more and more American households are choosing the first as a way of dealing with the problem of negative equity, while more and more companies are being driven towards bankruptcy. But mass foreclosures and bankruptcies are not a pretty prospect.

Inflation, by contrast, is hard to worry about in the short term, not least because the Fed’s expansion of the monetary base is leading to no commensurate expansion of the broad money supply; the banks would rather shrink than expand their balance sheets.

That leaves conversion, whereby, for example, all existing mortgage debts could be wholly or partly converted into long-term, low and fixed-interest loans, as recently suggested by Harvard’s Martin Feldstein. (In his scheme, the government would offer any homeowner with a mortgage the option to replace 20 per cent of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. The annual interest rate could be as low as 2 per cent and the loan would be amortised over 30 years.

At the very least, this would rescue many homeowners from the nightmare of negative equity. A similar operation might also be contemplated for the debts of those banks that have been partially or wholly recapitalised by the state. This would not add to the federal debt in net terms and would reduce the interest burden, if not the absolute debt burden, of households.

Such radical steps would naturally represent a haircut for creditors, notably the holders of mortgage-backed securities and bank bonds. Yet they would surely be preferable to the alternatives. And they would certainly be a less extreme solution than the general debt cancellation envisaged in the Old Testament.

Financially, 2008 has been an annus horribilis. The answer may be to make 2009 a true jubilee year.

The writer is a professor at Harvard University and Harvard Business School, a fellow of Jesus College, Oxford, and a senior fellow of the Hoover Institution, Stanford

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Author: Niall Ferguson
Original Source: Financial Times
Date Published: December 18 2008
Web Source: http://www.ft.com/cms/s/0/85432b32-cd32-11dd-9905-000077b07658.html
Date Accessed Online: 2008-12-19

Economie chinoise : la fin du grand bond en avant

Les turbulences mondiales sont en train de transformer le ralentissement cyclique de l'économie chinoise en un atterrissage brutal. La croissance économique en Chine est tombée en octobre au-dessous de 8 %. Ce freinage brutal fait suite à un ralentissement qui était sensible depuis le début de l'année, puisque le taux de croissance du produit intérieur brut est passé de 11,9 % au dernier trimestre 2007 à 10,4 % au deuxième trimestre 2008. Il montrait que l'économie avait atteint le point de retournement du cycle conjoncturel, après quatre années de croissance à deux chiffres, marquées par la création de surcapacités dans l'industrie et dans l'immobilier. Depuis fin 2007, le gouvernement menait d'ailleurs une politique monétaire restrictive, haussant les taux d'intérêt et plafonnant les prêts bancaires, afin de casser l'inflation et la spéculation.

Cette politique a fait sentir ses effets dans le secteur immobilier, qui a été le premier frappé par le retournement de tendance. Le volume des ventes a baissé à partir de janvier et l'investissement dans le bâtiment a reculé. Compte tenu du poids de ces secteurs (11 % du PIB), la contraction de leur activité a eu des effets en chaîne, réduisant la demande d'acier, de ciment, et provoquant des chutes de prix et l'accumulation de stocks dans ces secteurs en amont.

Par ailleurs, l'industrie manufacturière chinoise se trouve confrontée à des difficultés structurelles, car ses coûts salariaux augmentent. En outre, l'appréciation du renminbi (nom officiel de leur monnaie) - de 20 % entre juillet 2005 et juillet 2008 - a pesé sur la compétitivité des exportations dans les secteurs à forte intensité de main-d'oeuvre, comme le textile. Pourtant, au cours des dix premiers mois de l'année, les exportations ont continué à croître à un rythme soutenu (+ 22 % en valeur, 13 % en volume), quoique moins rapide qu'en 2007.

La croissance des exportations vers l'Europe, l'envolée des exportations vers l'Afrique et l'Amérique latine ont compensé le ralentissement de celles destinées aux Etats-Unis. Mais le choc de la récession mondiale sur les exportations chinoises va faire pleinement sentir ses effets au cours des mois qui viennent. En laissant le yuan se déprécier de 1 % par rapport au dollar début décembre, les autorités ont indiqué leur intention de soutenir autant que possible le secteur exportateur, qui représente environ 30 % de la production industrielle et contribue à une fraction importante de l'investissement interne.

PRESSION SUR LES SALAIRES

Face à cette conjonction de facteurs internes et externes de ralentissement, les autorités mènent désormais une politique monétaire qui soutient la croissance par une baisse des taux d'intérêt, et elles ont annoncé un vigoureux plan de relance. Il prévoit des dépenses de 4 000 milliards de renminbis (425,6 milliards d'euros) en 2009-2010, soit 8 % du PIB. Le programme inclut le financement d'infrastructures dans les transports, l'agriculture et le logement, des dépenses sociales dans la santé et l'éducation, des allégements fiscaux et le soutien des prix agricoles.

Cependant, des doutes planent sur sa portée, car il amalgame des mesures nouvelles et des projets déjà programmés ; quant à son financement, le budget central doit en couvrir environ 30 %, mais la contribution des gouvernements locaux est des moins assurées.

Comme le ralentissement de l'économie tient principalement à celui de la demande interne et qu'en 2009 la chute de la demande extérieure va à son tour contribuer à la baisse de l'activité, les prévisions sur le rythme de croissance qu'atteindra l'économie chinoise en 2009 (7,5 % selon la Banque mondiale, au moins 8 % selon les autorités chinoises) dépendent largement de l'efficacité escomptée des mesures de relance.

Tout porte à croire que c'est plus l'investissement public que la consommation des ménages qui soutiendra la demande intérieure. Le pouvoir d'achat des ménages va en effet être affecté par les réductions de main-d'oeuvre dans les industries exportatrices (qui déjà renvoient les travailleurs migrants dans leurs campagnes), et par la pression à la baisse sur les salaires, tout au moins hors du secteur public. Rééquilibrer l'économie en élargissant le marché intérieur au profit de la consommation des ménages reste un objectif, pour la prochaine décennie.

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Author: Francois Lemoine
Original Source: LE MONDE
Date Published: DECEMBER 17, 2008
Web Source: http://www.lemonde.fr/opinions/article/2008/12/17/economie-chinoise-la-fin-du-grand-bond-en-avant-par-francoise-lemoine_1132210_3232.html
Date Accessed Online: 2008-12-19

Buyers' or Sellers' Market? In China, Slump Stokes Activity; Caution in Shenzhen

SHENZHEN, China -- In China's home market, there is good news and bad. The bad news is that prices are tumbling. The good news is that the decline seems to have sparked a surge of sales activity.
Last week, figures from China's official National Development and Reform Commission said that property-price growth in 70 of the country's largest cities in November dropped 0.5% compared with October, the fourth consecutive month-over-month decline in a country that hasn't seen such declines in the four years since the government began publishing the numbers. On a year-over-year basis, price growth was at 0.2%, a record low, with Shenzhen registering a 14.8% year-over-year drop.
But falling prices seem to be where the similarity between the Chinese market and ailing Western markets ends. In the U.S. and Europe, falling prices have done little to boost demand, as buyers sit on the sidelines worrying about the economy or expecting prices to drop further. In China, falling prices have triggered a surge in sales activity, a sign of enormous pent-up demand in that market.
According to Shenzhen's municipal government, 6,435 new flats sold in the city in November, or 215 units a day. That is up sharply from the last week of October, when an average of 58 units were being sold a day.

Property, a Key Market
China's property market has implications for the broader economy, which relies on real-estate investment for 9.2% of annual growth in gross domestic product, according to Merrill Lynch.
A decline in construction activity has been a major factor in China's recent economic slowdown and has been a focus of government stimulus efforts.
Prices are likely to fall further next year because there is still a glut of apartments that were built in recent years as speculators helped drive up prices beyond the means of many ordinary home buyers. Thousands of units also are expected to be added to the market next year.

'More Corrections'
Before China's home prices can recover, they first need to fall, says Nicole Wong, head of China property research for broker CLSA Asia-Pacific Markets. "It's going to take more corrections and policy moves for prices to see any rebound," Ms. Wong says.
Turning around China's slumping property market could depend on luring Jamie Chen and tens of millions of other potential home buyers to the table. The problem, she says: In many of China's biggest cities, falling home prices are still too high.
"If I had enough money to make a down payment, I wouldn't wait. I think it is a good time to buy now with all the policies to help buyers," said Ms. Chen, a 28-year-old project-management consultant living with her parents in a suburb of Shenzhen.
The fall in prices is a sharp turnaround from just a few months ago, when China was still posting nationwide year-on-year price growth in the double-digit percentages. Even so, Citigroup says the national average ratio of property price to household annual disposable income in China is 8.3 times, compared with an average of 6.5 times to 7.5 times for developing countries. In a major city like Shenzhen, the ratio last year was 12.4 times, up from 8.6 times just a year earlier.
Dropping prices haven't caused a foreclosure wave as in the U.S. because Chinese consumers typically put down at least 30% on a mortgage, and many still pay for their houses in cash. China's economy also is still expanding, giving a lift to national income levels. Mortgages remain attainable, and authorities slashed mortgage rates and loosened home-buying rules and taxes on Oct. 22 to reduce costs.
The Shenzhen Factor
Shenzhen, a manufacturing center of nine million people, is one of China's biggest and most mature property markets and is considered a bellwether for the nation's housing scene. The first major market hit by China's property slump, Shenzhen also was the first to see property developers slash prices.
Brokers say prices in parts of the city have fallen some 30% in the past year, following a 50% drop in number of units sold from a year ago. Still, prices in Shenzhen are 63% higher than in 2004, according to real-estate brokerage firm DTZ.
On a recent weekend at the MixC, a mall in Shenzhen, shoppers swarmed two large display booths promoting high-end apartments. A lot of brochures were picked up, but few commitments were made. "I'm not planning to buy now, but maybe next year," said one shopper, who picked up a brochure. "Things are definitely going to continue to go down."

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Author: JONATHAN CHENG
Original Source: Wall Street Journal
Date Published: DECEMBER 17, 2008
Web Source: http://wsjofharryliuhao.blogspot.com/2008/12/buyers-or-sellers-market.html
Date Accessed Online: 2008-12-18

A Lifestyle Distinct: The Muxe of Mexico

Mexico City — Mexico can be intolerant of homosexuality; it can also be quite liberal. Gay-bashing incidents are not uncommon in the countryside, where many Mexicans consider homosexuality a sin. In Mexico City, meanwhile, same-sex domestic partnerships are legally recognized — and often celebrated lavishly in government offices as if they were marriages.

But nowhere are attitudes toward sex and gender quite as elastic as in the far reaches of the southern state of Oaxaca. There, in the indigenous communities around the town of Juchitán, the world is not divided simply into gay and straight. The local Zapotec people have made room for a third category, which they call “muxes” (pronounced MOO-shays) — men who consider themselves women and live in a socially sanctioned netherworld between the two genders.

“Muxe” is a Zapotec word derived from the Spanish “mujer,” or woman; it is reserved for males who, from boyhood, have felt themselves drawn to living as a woman, anticipating roles set out for them by the community.

Anthropologists trace the acceptance of people of mixed gender to pre-Colombian Mexico, pointing to accounts of cross-dressing Aztec priests and Mayan gods who were male and female at the same time. Spanish colonizers wiped out most of those attitudes in the 1500s by forcing conversion to Catholicism. But mixed-gender identities managed to survive in the area around Juchitán, a place so traditional that many people speak ancient Zapotec instead of Spanish.

Not all muxes express their identities the same way. Some dress as women and take hormones to change their bodies. Others favor male clothes. What they share is that the community accepts them; many in it believe that muxes have special intellectual and artistic gifts.

Every November, muxes inundate the town for a grand ball that attracts local men, women and children as well as outsiders. A queen is selected; the mayor crowns her. “I don’t care what people say,” said Sebastian Sarmienta, the boyfriend of a muxe, Ninel Castillejo García. “There are some people who get uncomfortable. I don’t see a problem. What is so bad about it?”

Muxes are found in all walks of life in Juchitán, but most take on traditional female roles — selling in the market, embroidering traditional garments, cooking at home. Some also become sex workers, selling their services to men. .

Acceptance of a child who feels he is a muxe is not unanimous; some parents force such children to fend for themselves. But the far more common sentiment appears to be that of a woman who takes care of her grandson, Carmelo, 13.

“It is how God sent him,” she said.

Katie Orlinsky contributed reporting from Juchitán, Mexico.

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Author: MARC LACEY
Original Source: New York Times
Date Published: December 7, 2008
Web Source: http://www.nytimes.com/2008/12/07/weekinreview/07lacey.html
Date Accessed Online: 2008-12-13

L'heure de vérité pour l'euro, par Pierre-Antoine Delhommais

L'économiste américain et Prix Nobel Milton Friedman affirmait que l'on pourrait juger de la réussite de l'euro seulement le jour où les pays de l'Union monétaire entreraient en récession. On y est. Selon l'OCDE, le PIB de la zone euro devrait reculer de 0,6 % en 2009. La monnaie unique va-t-elle passer avec succès le "krach test" des subprimes ?

A cette question, les économistes apportent, comme il se doit, des réponses opposées. Dans des points de vue publiés par Project Syndicate, Martin Feldstein, professeur à Harvard, estime que l'euro est en grand danger ; Barry Eichengreen, professeur à Berkeley, juge au contraire qu'il va en sortir renforcé.

Premier argument des optimistes : la BCE, gardienne de l'euro, a gagné en crédibilité. Non qu'elle se soit montrée particulièrement perspicace - elle n'a pas plus que les autres vu arriver l'ouragan. Non que sa stratégie ait particulièrement convaincu - on se demande encore pour quelle raison elle a relevé ses taux en juillet et pourquoi elle a ensuite tant tardé à les baisser. Mais la Fed, de son côté, par la faute d'Alan Greenspan, s'est tellement démonétisée, la Banque d'Angleterre s'est tellement ridiculisée dans l'affaire Northern Rock, qu'en comparaison, la BCE donne presque l'impression d'avoir effectué un sans-faute.

Deuxième élément favorable à l'euro : les pays européens qui ne le possèdent pas souffrent encore plus que ceux qui le détiennent. A commencer par la petite et malheureuse Islande : son économie, dont les performances suscitaient pourtant l'admiration des organisations internationales, a implosé. La Bourse de Reykjavik a perdu 95 % depuis le 1^er janvier, et son déficit budgétaire devrait frôler les 13 % du PIB en 2009. Pour boucler leurs fins de mois, les Islandais bradent leurs 4×4, tandis que les étudiants partis dans des universités étrangères sont obligés de rentrer au pays, incapables de financer leur scolarité.

La Hongrie a elle aussi chaviré, tout comme la Lettonie, et seule l'intervention d'urgence du FMI a permis de sauver les naufragés. D'autres pays pourraient bientôt connaître le même destin, victimes de la fuite des capitaux étrangers qui leur assuraient jusqu'à présent leur développement. Même le Danemark a souffert, obligé de relever ses taux pour défendre sa monnaie, tandis que le Royaume-Uni se retrouve dans une situation à haut risque : la livre sterling baisse aussi vite que le déficit public monte, ce qui pourrait finir par poser de très gros problèmes de financement à l'Etat.

A Reykjavik, à Copenhague et un peu partout en Europe, on entend la même prière : saint Euro, adopte-nous et protège-nous des malheurs économiques de ce monde ! Même à Londres et en Suisse, certains hauts dirigeants politiques seraient prêts à se convertir.

C'est avant tout à sa taille que l'euro doit de s'être imposé comme bouclier anti-subprimes. En matière de monnaies et en temps de crise, les investisseurs préfèrent les grosses : celles dont la masse critique est telle qu'elles constituent à elles seules un gage de liquidité et de sécurité. Parmi elles, le dollar, le yen, l'euro, le franc suisse et, jusqu'à il y a peu de temps encore, la livre sterling. Bref, le prestige accru de l'euro se mesure au nombre croissant de pays désireux de rejoindre le club. Voilà pour les optimistes.

Les pessimistes maintenant. Pour eux, la crise des subprimes révèle et confirme le défaut majeur de l'édifice monétaire européen : l'absence d'une structure politique capable de prendre des mesures fortes dans des moments forts. Pour preuve, les bagarres franco-allemandes à propos de l'adoption du plan de sauvetage bancaire. Pour preuve, surtout, un plan de relance a minima (1,5 point de PIB), trois fois moins qu'aux Etats-Unis. De surcroît une simple addition des plans nationaux, sans aucune cohérence globale, certains misant sur l'offre, d'autres sur la demande. Comme si la Californie avait mis en place ses propres mesures de relance pendant que le Texas adoptait les siennes.

Reflet de ces tiraillements européens : sur les marchés, l'Italie doit aujourd'hui offrir des taux supérieurs de 1,4 % à ceux de l'Allemagne pour emprunter à dix ans, la Grèce de 2,1 %, contre seulement 0,2 % à 0,3 % avant le début de la crise. En d'autres termes, la zone euro est en train de perdre à toute vitesse cette homogénéité financière et monétaire qu'elle avait eu tant de peine à acquérir. Jusqu'où ces forces centrifuges agiront-elles ?

L'Allemagne se raidit, inquiète à l'idée que les déboires des "pays du Club Med" - comme un responsable de la Bundesbank les avait aimablement qualifiés - finissent par la contaminer. Ses plus hauts dirigeants monétaires, Jürgen Stark et Axel Weber, expliquent que la BCE ne doit pas aller plus loin dans la baisse des taux. Sur le plan budgétaire, Berlin estime qu'il n'a pas à casser la tirelire patiemment remplie grâce à ses efforts de modération salariale pour aider des pays ayant vécu au-dessus de leurs moyens et ayant accumulé les déficits. A l'inverse, jusqu'où les pays d'Europe du Sud - la Grèce en premier lieu - pourront-ils s'enfoncer dans la crise économique et sociale sans crier grâce, sans être tentés d'abandonner l'euro, devenu un carcan ? Dans ce cas, l'euro - et c'est le pronostic des plus pessimistes parmi les pessimistes - finirait par ressembler à s'y méprendre au deutschemark et à ses satellites. Ou pour paraphraser une formule célèbre définissant le football : "L'euro, c'est une monnaie qui se joue à quinze, mais à la fin, c'est toujours l'Allemagne qui gagne."

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Author: Pierre-Antoine Delhommais
Original Source: LE MONDE
Date Published: 13.12.08
Web Source: http://www.lemonde.fr/opinions/article/2008/12/13/l-heure-de-verite-pour-l-euro-par-pierre-antoine-delhommais_1130748_3232.html
Date Accessed Online: 2008-12-13