Economic Growth - Ethnic Russians back home to fight population decline

Economic Growth - Causes & Consequences & Problem of Slow Growth

Chinese economic growth and pollution
The environmental effects of China's rapid economic growth on global pollution



The Great Depression
Scenes from the the Great Depression of 1929 which started in America and spread to the rest of the world

Taiwanese firms feel pinch of rising costs in China

ST Feb 20, 2008

Some are returning home while others are moving to lower-cost countries like Vietnam

TAIPEI - CHEAP labour, readily available land and generous tax breaks made China the dream factory for Taiwanese businessmen who were among the first to set up shop in the mainland in the 1980s.

But two decades later, a small but growing number of Taiwanese companies - deterred by rising business costs in China - are heading home or casting their sight on new investment destinations such as Vietnam.

In the past 16 months, Taiwan's Ministry of Economic Affairs (MOEA) received a record 102 investment applications from Taiwanese companies based overseas.

Of these cases, 60 were filed by mainland-based Taiwanese firms with a total estimated investment value of NT$8.5 billion (S$380 million). Some 50 applications were R&D related, said reports.

The phenomenon underscores the challenges faced by Taiwanese and foreign firms amid China's changing business environment.

The mainland has put in place new measures which will hike up business costs - especially for labour-intensive and low-value-add industries.

The new Labour Contract Law, which took effect this year, mandated companies to give open-ended contracts to employees who have worked for 10 years or have completed two fixed-term contracts.

These contracts include terms such as higher company contributions to pension and severance pay.

Taiwanese economic officials estimated that the new regulation could push up labour costs by between 10 and 40 per cent - especially for Taiwanese firms in the low-cost manufacturing centre in the Pearl River Delta.

Some analysts predict that about 10 to 20 per cent of Taiwanese manufacturers in the delta could close down this year.

Dealing another blow to Taiwanese firms, China will from this year gradually phase out the preferential tax rates enjoyed by many foreign companies.

These firms, which previously paid 15 per cent in corporate tax, will now be taxed 25 per cent like their Chinese counterparts.

The changes were the last straw for some Taiwanese firms which were already struggling with rising wages, a stronger yuan, the scrapping of export tariff rebates and stricter pollution-control requirements.

But observers say a mass withdrawal of investments is unlikely for Taiwanese businessmen, who are among the largest investors in the mainland.

There are an estimated one million Taiwanese businessmen and their dependants in China.

Analysts point out that the capital repatriated to the island is only a trickle compared to the flood of Taiwanese investments bound for China.

In the past 17 years, Taiwanese firms have poured US$63 billion (S$89 billion) into the mainland - about 60 per cent of Taiwan's outbound investments. In 2005, the ratio even hit a record high of 71.5 per cent.

'It is more a case of Taiwanese firms diversifying their investments than pulling out completely from China. Some have termed it the 'China-plus-one' strategy,' said Mr Hong Tsai-lung of the Taiwan Institute of Economic Research.

Despite rising business costs, China is still a magnet for investments because of its infrastructure, large base of suppliers and relatively skilled yet affordable labour, Mr Hong told The Straits Times. His views were echoed by others.

'For labour-intensive businesses like the textile industry, moving back to Taiwan would not solve their problem because the labour cost is still higher compared to China,' said Mr Andrew Yeh, chairman of the Taiwan Merchant Association in the southern Chinese city of Dongguan.

For firms like Unitech, a leading Taiwanese printing circuit board manufacturer, Taiwan's technological know-how is a big pull factor. The company has invested in a new solar cell plant in Ilan county.

'Our operations are fully automated, so labour cost is not a major concern,' Unitech president C.H. Hsu told The Straits Times.

'But the labour-intensive businesses like textile firms are unlikely to return to Taiwan. They left in the first place because they could not survive here.'

For Taiwanese firms sourcing for new investment targets, Vietnam has emerged as a popular choice. In fact, Taiwan is already the largest investor in the South-east Asian state.

But some mainland-based Taiwanese businessmen say it is still too early to pack their bags.

Said Mr Yeh: 'I will give it six months to a year. I am running a factory, not some roadside stall which I can just fold up any time and leave.'

Inflation at 11-year high in China

ST Feb 20, 2008

Consumer prices up 7.1 per cent last month; worse to come as producer prices shoot up as well

BEIJING - CHINA recorded its highest inflation rate in 11 years last month after devastating winter storms worsened food shortages, according to data released yesterday.

Consumer prices in January climbed 7.1 per cent from the same month last year, driven by an 18.2 per cent rise in food prices, the National Bureau of Statistics said.

Among individual goods, pork prices shot up 58.8 per cent last month compared with the year-earlier period, while cooking oil prices rose by 37.1 per cent, the bureau reported.

Analysts warned there might be sharper increases to come, due to high costs for coal and other industrial materials as well as the lingering effects of the country's worst winter storms in 50 years.

The 7.1 per cent figure for January was up from the 6.5 per cent seen in December last year and was also the highest since September 1996, when the index rose 7.4 per cent.

The rise in the consumer price index (CPI) coincided with the start of three weeks of freak winter weather in January that hit many parts of China, destroying crops and disrupting power and transport networks.

In some cities, the prices of tomatoes, oranges and other scarce produce doubled during the storms, news reports said.

Nationwide, official data showed vegetable prices rose by 17.5 per cent last month, compared with 9.5 per cent last December.

So far, the inflation spike is confined to food, according to yesterday's data.

Prices for non-food items went up by only 1.5 per cent in January, over the same month last year.

Mr Yao Jingyuan, chief economist at the statistics office, said inflation would ebb in the second half of the year.

'The CPI was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country,' he said.

But the latest figures also reflected a trend that had worsened throughout last year despite wide-ranging government measures to keep a lid on prices and rein in the nation's economy, which expanded at a 13-year high of 11.4 per cent last year.

As part of anti-inflation efforts, China last year raised interest rates six times. It also put a temporary cap on some commodity prices last month.

But taming inflation has become a far tougher task after last month's severe weather.

'This is not the peak. The peak will probably be in February, because China suffered more in February from the ice and snow storms,' said Mr Chen Xingdong, a senior economist at BNP Paribas in Beijing.

Mr Hong Liang and Mr Yu Song, economists with Goldman Sachs, said in a note to clients that the CPI's year-on-year rise this month is likely to exceed 7 per cent.

Another key sign that the inflation problem is worsening was data released on Monday showing China's producer or wholesale prices were up 6.1 per cent last month from a year earlier, the fastest increase in more than three years.

'Energy costs, raw materials, mineral products are all shooting up. Labour costs are also increasing. These have to translate into inflation in one way or another,' said BNP Paribas' Mr Chen.

AGENCE FRANCE-PRESSE, ASSOCIATED PRESS, REUTERS

Zimbabwe Inflation and Economic Instability

In the latest report (Dec 2007), Zimbabwe's inflation has hit above 66,000%..

"Zimbabwe's inflation rate for the month of December has hit a new all time high of 66,212 percent - nearly triple the November figure of 26,741 percent. Food and non-alcoholic drinks soared by 79,412 percent while non-food items rose 58,493 percent" - See article

Another interesting article: Zimbabwe: Life under the world’s highest inflation rate

Video from BBC News (dated 15 Feb 2008)

And in these below two videos, see how children play with money which had become worthless and the woman carrying a huge basket of Zimbabwean currency just to buy groceries at the shop... Businesses have found it close to impossible to do business in the climate of uncertainty..

Income gap widens in Singapore last year

SINGAPORE, Feb. 13 (Xinhua) -- The income gap widened in Singapore last year, as higher-income households continued to experience faster income growth than lower-income ones, according to a report issued by the Singapore government Wednesday.

Singapore's Gini coefficient, a summary measure of income inequality, increased to 0.485 in 2007 from 0.472 in 2006, said the latest report by the Department of Statistics.

However the Singapore government said that its Goods and Services Tax (GST) offset package which was weighted in favor of the lower-income groups helped to overcome that gap.

After adjusting for government benefits and taxes, the Gini coefficient was actually lower at 0.46 in 2007 than the previous year, said the report.

The good news is that the average monthly household income in Singapore rose 9.6 percent to 6,280 Singapore dollars (about 4,423 U.S. dollars) last year, the fastest pace over the last decade.

"The strong household income growth in 2007 may be attributed to strong wage grow on the back of healthy economic growth and a tight labor market," said the report.

The average monthly income among households with at least one employed person grew 9.1 percent to 6,830 Singapore dollars (about4,810 dollars).

After adjusting for inflation, Singaporean households enjoyed a real income growth of 6.9 percent last year.

Keeping the Gini in the bottle

Govt measures help to control income disparity

Thursday • February 14, 2008 (TODAYonline, by Nazry Bahrawi)

AT A time when the economy simply sparkled, wages for the low income and lower-middle income groups went up last year, but not as quickly as they did in 2006.

And if not for Government intervention, the widening income gap would have been more pronounced, according to a Department of Statistics (DOS) report yesterday.

The bottom 10 per cent of households with at least one working Singaporean brought home $310 per member each month — before inflation — compared to $300 in 2006. In real terms, the annual change in income was 3.3 per cent compared to 6.6 per cent growth in 2006 over the year before.

Those in the 11th to 20th percentile took home $570 per household member before inflation compared to $540 in 2006. In percentage terms, this was 3.6 per cent compared to 5.6 per cent the year before.

As Singapore households experienced the highest growth in average wages in almost a decade, the Key Household Income Trends report showed the middle-income and richer households, for whom the rate of wage growth last year eclipsed the increases in 2006, pulling away from the bottom 40 per cent.

In the 41st to 50th percentile, wages increased by 4.7 per cent per household member, to $1,190, compared to an increase of 4.2 per cent in 2006.

Meanwhile, the top 10 per cent of households earned 11.1 per cent more last year — or $7,940 per member.

Due to the demand for skilled and knowledge workers outstripping supply, this latter group was able to demand higher wages — coming especially in an economic upturn, said UOB economist Ho Woei Chen.

She told Today: "For instance, those in the banking sector especially in the field of wealth management would experience a higher wage growth compared to those in the manufacturing sector."

The average income for a resident household headed by a Singaporean or permanent resident with at least one working person, was $6,830 last year, which was a 9.1-per-cent increase over 2006. The increase was 6.9 per cent if inflation was taken into account.
The good news is that the average monthly household income in Singapore rose 9.6 percent to 6,280 Singapore dollars (about 4,423 U.S. dollars) last year, the fastest pace over the last decade.

"The strong household income growth in 2007 may be attributed to strong wage grow on the back of healthy economic growth and a tight labor market," said the report.

The average monthly income among households with at least one employed person grew 9.1 percent to 6,830 Singapore dollars (about4,810 dollars).

After adjusting for inflation, Singaporean households enjoyed a real income growth of 6.9 percent last year.

Making sense of the price index

By Nicholas Fang (ST Feb 15, 2008)

WHY do the prices of certain consumer items seem to increase more sharply than the consumer price index (CPI) - one of the most commonly used indicators of inflation?

The reason, said the Department of Statistics (DOS) yesterday, is that the CPI is designed to be an accurate reflection of overall spending by Singaporeans. The index reflects average price changes and is weighted to reflect actual spending patterns, DOS added.

Costlier food, transport and health care drove the CPI to a 25- year high of 4.4 per cent in December compared with a year earlier.

Mrs Foo-Wu Wen Chee, deputy director of the DOS' consumer price indexes section, said the index measures the prices of a fixed basket of 5,170 goods and services commonly used by Singaporean households.

Speaking at a conference on the Economic Survey of Singapore by the Ministry of Trade and Industry, she said a change in the index reflects the average change in the prices of all items in the basket. That is why the CPI's rise sometimes appears smaller than the jump in the prices of certain goods.

Mrs Foo-Wu said the index is very specific. For example, it uses Royal Umbrella brand rice, and Giordano and Crocodile men's shirt labels. 'Items are selected from 3,000 outlets covering a wide range of retailers and service providers across the island,' she said.

The items in the basket are given different weights according to the Household Expenditure Survey which covers more than 6,700 households. 'That sample size is sufficiently large for a country such as Singapore, which has four million people compared to other countries,' Mrs Foo-Wu said.

Britain, with an estimated population size of 60 million, uses a sample of 6,300 households while the United States, with 292 million people, uses 7,800 households.