Japan's anti-piracy tactics

Since I live in the same town as Capt Richard Phillips, it was of great interest to see that pacifist Japan has passed a law allowing the Japanese navy to fire on Somali pirate vessels. Japanese warships are allowed to protect any commercial ship, not just those under Japan's flag.

According to the BBC, "previously, the Japanese force was only allowed to escort Japanese vessels, or those with Japanese cargoes or crews, and use weapons only for self-defense."

Within Japan there are concerns over expanding the role of Japan's military.

http://english.aljazeera.net//news/asia-pacific/2009/06/2009619124944697820.html

http://news.bbc.co.uk/2/hi/asia-pacific/8109242.stm

Foreign investment in China

Foreigners may want to rethink their drop in investment in China.

A "W" shaped recovery is a better investment than the projected U.S. "L" shape recovery.


http://english.aljazeera.net/news/asia-pacific/2009/06/20096154332867464.html

Impact on Shanghai

Acceptance may grow as the economic impact of these events increase.

http://www.nytimes.com/2009/06/15/world/asia/15shanghai.html

No Tweets about Tiananmen Twentieth

I was wondering how a country that so heavily censors Internet traffic would handle Twitter ... they simply block it altogether.

http://news.bbc.co.uk/2/hi/asia-pacific/8078538.stm

Protests in Tiawan

Thousands in Taiwan protest the current administration's pro-China ties. (See my May 5th post about China's business inroads in Taiwan).

I would be concerned about China's increased military spending and number of missiles aimed at the island.


http://english.aljazeera.net/news/asia-pacific/2009/05/20095179175752227.html

English language and the Japanese

English is the most commonly used global language. Japanese students begin studying English in junior high, and many start private lessons at an earlier age. Emphasis was on written English; resulting in a reluctance to speak English unless it could be done well.

Popular television programs supposed teach English, but most are entertainment-based rather than instructional.

But as more businesses recognize the need to compete globally, firms such as Mitsubishi Bank are announcing that all business will be conducted in English.

A number of recently published books are taking advantage of the Japanese increasing interest in English, both written and spoken. Author Seiichi Kanise talks about the importance of being able to "tell a story". Another author, Kyoko Yasui, tells women that they can use English to become a freelancer and take control of their careers.





http://www.yomiuri.co.jp/dy/features/culture/20090428TDY12002.htm

Chinese Earthquake Tourism

The one year anniversary of the Sichuan earthquake is approaching ... so time for an

Earth quake theme park?

Another area is building a quake ruins park ... along with a "tourist reception center, cemetery, a memorial and a museum of folkways and culture."

http://news.xinhuanet.com/english/2009-05/05/content_11315604.htm

Chinese investment in Taiwan

It's surprising to see a Chinese company investing in Taiwan and even more surprising to see Beijing agree to Taiwan's participation in a World Health Organization meeting.

The two countries haven't been friends since 1949 and in the 1970s mainland China bumped Taiwan out of the U.N.

The new investment is China Mobile, a Chinese government-owned wireless carrier. They have invested heavily in Taiwan's third-biggest phone company.

According to the WSJ, the two countries also signed a series of agreements "easing limits on investment between them and establishing the first regular two-way air and shipping traffic in six decades."



http://www.marketwatch.com/news/story/taiwan-stocks-surge-further-china/story.aspx?guid={372BD0A2-525E-4DF8-8EFD-2059578DD722}&dist=msr_1

Is China protectionist or helping foreign business?

An April 28th Wall Street Journal headline caught my eye, "Foreign Businesses Say China is Growing More Protectionist", then two days later the same paper proclaimed, "China's Stimulus Spurs U.S. Business." So which is it?

The American Chamber of Commerce stated that "protectionism was one of its major concerns this year" and the European Chamber of Commerce worries that Chinese companies want to "create monopolies or oligopolies and have less competition."

Chinese officials counter that Western countries anti-dumping laws and the U.S. attempt to insert a "buy American" clause in the U.S. stimulus bill aren't any different than their own attempts to stimulate their local economy.

China's $585 billion stimulus is largely being spent on Chinese-only projects, such as the high-speed rail project between Beijing and Shanghai. The 4/30 WSJ suggests that the Chinese-only clauses are actually helpful in that the Chinese are not dumping cheap steel on the world markets which would send prices in a spiral.

American firms, in China, directly benefiting from the Chinese stimulus include excavator and tire makers and fast-food chains. China's infrastructure spending went into overdrive when the stimulus was announced and many projects were fast-tracked. The U.S. is unable to match the pace of the Chinese building.

Firms not benefiting are FedEx and DHL who got shut out of China when a new postal law banning "foreign companies from delivering express mail inside China" was passed a few weeks ago.

New transparency for China

Mexico has been critical of China for quarantining 71 Mexicans for the swine flu despite the individuals being asymptomatic. The Mexicans were flown back to Mexico re a chartered plane on Tuesday.

China also quarantined 2 U.S. (it's not clear if they had flu-like symptoms) and 29 Canadians (connected to the University of Montreal) despite their lack of symptoms.

274 guests remain quarantined in a Hong Kong hotel after a Mexican traveler tested for the virus.

It may sound like a bit much but China's response, and openness, is a dramatic improvement over their treatment of the SARS outbreak. When SARS spread to Hong Kong and world, it was discovered that Chinese officials had hidden the outbreak of SARS for four months.

Comparisons are being made to China's quick response to the Sichuan earthquake, especially as the country reflects on that disaster's one year anniversary.


http://www.nytimes.com/2009/05/01/world/asia/01china.html?partner=rss&emc=rss

http://www.cbsnews.com/stories/2009/05/05/health/main4991388.shtml

China's market and counterfeits

China is the world's largest cell phone market. And growing. So that's why counterfeit, or shanzhai, phones are causing a stir. Hi-Phone's can be made or $20 and shipped all across the world. You can expect that Nokia, Motorola and Apple would be complaining to the Chinese government, but the biggest impact may come from China's own cellphone makers.

Not much will change with the counterfeiters until China's own businesses feel the pinch and demand patent laws and the government to protect their intellectual property.

http://www.nytimes.com/2009/04/28/technology/28cell.html

Japan sending home Latin American workers

In an interesting twist, Japan is paying foreign workers to leave the country.

This is the same country that revised the law in 1990 to allow Japanese descendants to receive long-term resident status -something that is very hard for foreigners to get in Japan.

The Japanese aren't fond of foreign workers, so when the export industry boomed in the 1990s, they cooked up a plan to bring Japanese descendants back from Brazil and Peru to fill the jobs.

Unfortunately, the experiment didn't quite work as well as officials had hoped. The Japanese descendants were a little too, um, Latin American for Japanese tastes. Now that factories need to lay off workers it seems like a good time to shift the policy. If the workers accept the pay to leave, they must also agree not to seek work in Japan again.





http://www.nytimes.com/2009/04/23/business/global/23immigrant.html?scp=1&sq=japan%20brazil%20workers&st=cse

Car emissions and solar mobile phones

All eyes (and many hopes) are on the Shanghai Auto Show. Just about the only ones in the world buying cars right now are the Chinese, thanks to government incentives that include a tax cut and cash-refunds.

Since the automakers are excited about the number of buyers they have begun designing cars that the Chinese want ie. better gas mileage. Meanwhile, Chinese emission standards are non existent, so manufacturers aren't bothering with the annoyance. So much for global warming.

On the plus side, Sharp has designed a sun-powered, waterproof mobile phone that goes on sale in Japan on Monday that is being touted as helping to reduce carbon dioxide emissions.

I don't think the cell phone usage will quite make up for the new cars in China.


http://english.aljazeera.net//news/asia-pacific/2009/04/20094209482632287.html

http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_KDDI_SOLAR_PHONE_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html

China's growth

The numbers are out and China's GDP grew 6.1% last quarter. Down from the 13% 2007 numbers, China is not in bad shape. Here are some important attributes:

* China's financial system is healthy and the banks are lending
* China has a fiscal surplus and is financing it's stimulus through that

China's biggest challenge is to increase domestic demand so the country is not as export reliant. This is a tall order. Yes, there were record car sales in March, but the Chinese do not have health plans or social services and continue to sock money away for a rainy day.




http://english.aljazeera.net//business/2009/04/20094163218569726.html

Which China is it?

Is China the country of economic strength telling rich nations how to manage their economy or is it a developing country with (tens of) millions of poor?

It's both. China holds $1 trillion in U.S. debt and an additional $1 trillion in other foreign reserves. It is also considered a lower-middle income country, with $936-3,705 in annual per capita income, according to 2007 World Bank figures.

What's interesting is China likes to plays the "we're rich" card when they want to talk about global international policies and the "we're poor" card when asked to ante up to help others or to fight climate change.







http://www.reuters.com/article/newsOne/idUSTRE53501820090406?pageNumber=3&virtualBrandChannel=10452

Japan's stimulus math

Everyone sites Japan's previous crisis for lessons on this one. It follows that Japan knows a thing or two about how tackle these things.

They've clearly decided that stimulus is the way to go. They've added another US$150 billion (15.4 trillion yen). This is in addition to the previous 12 trillion yen number.

The measures represent about 3% of GDP.

There's a continued trend to help small businesses, including contract workers. There are also measures to expand "green" technologies and support elder/health care. Other targeted areas are boosting fuel-efficient vehicles and consumer electronics.

Unemployment in Japan hit a three-year high of 4.4 per cent in February.

http://english.aljazeera.net//business/2009/04/20094685024327368.html

http://news.bbc.co.uk/2/hi/business/7985239.stm

http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_STIMULUS_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html

China dialog

The U.S. and China have agreed to "establish a Strategic and Economic Dialogue group" the stated intent is "to tackle the global financial crisis and strengthen the worlds's financial systems".

They may end up talking more about North Korea and Iran.

http://news.bbc.co.uk/2/hi/asia-pacific/7977145.stm

Careful what wish for

It's just been a few mere months since the eyes of the world were beckoning China to help bail out the world economy. Now China is flexing its political muscle and calling for a new currency to replace the dollar as the global standard.

There's been lots of finger pointing over the current global crisis. Some say the Chinese are to blame by investing heavily in US Treasuries and flooding the market with easy cash - thus lulling the Fed into holding interest rates too low for too long. The Chinese say the Fed was indeed at fault, and those policies were not only misguided, but put the entire global economy at risk.

The Chinese feel that a different reserve currency, overseen by the International Monetary Fund, would help emerging and developing nations better manage their own economies.






http://english.aljazeera.net/business/2009/03/20093253587630765.html

China's growth numbers

Last week China officially stopped clinging to their 8% targeted yearly growth number. This week, the World Bank downgraded their assessment from 7.5% to 6.5%. The lower number is more in line with independent economists/Chinese watchers.

Even at 6.5%, growth is growth and China is faring much better than the two economies larger than it (US and Japan). The 2009 projections for he world economy is only a 0.9% expansion.




http://english.aljazeera.net//news/asia-pacific/2009/03/20093184551167145.html

China's anti-monopoly law and Coke

China enacted their first anti-monopoly law in August 2008. The idea was to promote a competitive, fair market.

Enter Coke. It is proposing to take over China's Huiyuan Juice Group. Coke wants to gain ground with the more affluent Chinese.

The deal is awaiting approval. If it goes through, the purchase, valued at 2.4 billion dollars, would be the largest bid by a foreign firm to takeover a Chinese company.

If Coke's bid is rejected on national-interest grounds, it could make tit for tat difficulties for Chinese firms trying to buy abroad.

Legally, there doesn't appear to be a reason to impede the transaction.

"It doesn't raise national security issues, it's just juice," said Susan Finder, a Hong Kong anti-trust lawyer for the US firm Heller Ehrman. "Is Huiyuan a national treasure of a brand?"

However, how long the approval process will take remains unclear."
Source: http://www.chinatoday.com/law/china.law.case.01.htm

China's own market

How quickly can China grow its own market? Long reliant on others to turn its economic wheels, China is spending internally in hopes of creating its own domestic market. According to the Wall Street Journal (2/10/09), domestic consumption was 39% of China's gross domestic product last year, compared to 69% of GDP in the U.S.

The government is particularly focusing on rural areas and providing incentives ranging from 13% electronic goods subsidies to one time cash gifts ranging from $13-$26 per household (a large sum of money for residents earning $700 per year).

The Chinese households are renown for their high savings and low debt. Until the government addresses their social services and health care inadequacies, the Chinese will continue to save and not spend.

Japan's Asia package

As most export reliant countries are doing, Japan is speaking out against protectionism. In a bid to support its neighbors, Japan is also providing aid to nearby countries aid- US $17 billion (1.5 trillion yen) - to be spread out over the next three years on infrastructure projects and trade promotion.


http://news.bbc.co.uk/2/hi/business/davos/7862424.stm
http://edition.cnn.com/2009/BUSINESS/01/31/davos.wef.japan/index.html

China's African relationship

As Hillary prepares to tour China, this is what the Chinese President was doing last week:

"China's President Hu Jintao has granted $22m (£15m) in aid to Tanzania as he continues his tour of Africa"

http://news.bbc.co.uk/2/hi/asia-pacific/7891418.stm

Dodgy Chinese economics

Getting economic data out of China has always been difficult. The government keeps tight control over their numbers so the message fits with their goals. Their current objective is to prove, by next year, that their $586 billion stimulus package is working.

The Chinese target for economic annual growth rate is 8%. Basically, any other number will make the government squirrely. Global economists do their best to measure China's data, but quarterly expenditure breakdowns are not provided to compare to output figures. And with exports and property values down, it is unlikely that China will meet its goal.

The Chinese premier has already publically blamed the US for causing the economic crisis, which postures the situation for the Chinese public.

Nissan relocating plant; central bank buys shares

It's been a busy month so far.

Nissan is not merely laying off workers, it is moving a plant out of Japan (to Thailand). Building plants outside of Japan is not new, but closing and relocating plants out of Japan is.

Also not new, but infrequent, Japan's central bank announced it would buy $11.12 billion (1 trillion yen) of BBB minus or lower company shares from the nations banks. This last occurred in September 2004 and in November 2002. The move is to add stability to the banking system.

How to spend the Japanese stimulus

As Japan suffers from an export bubble, their challenge is to create domestic demand. That's no small feat considering that exports accounted for 74% of Japan's growth, while domestic spending during the same period was only 6.6%.

As with China, Japan is realized that a heavy reliance on exports makes them vulnerable.

So the focus has shifted to domestic jobs, which should create domestic demand. When Japan invested heavily in infrastructure spending in their last downturn, they already had well maintained roads and bridges, so they ended up with aimless or useless projects.

Politicians are recognizing that those projects only create jobs during construction. Now they are looking for jobs that will have a lasting impact.



http://www.nytimes.com/2009/02/06/world/asia/06japan.html?pagewanted=1&_r=1

Tracking Japanese Stimulus

I'm still gathering numbers on various stimulus packages. According to 1/29/09 WSJ, Japan's series of stimulus measures amount to 75 trillion yen ($842.5 billion). And the Liberal Democratic Party just pushed through an extra fiscal year end (March 31) of 4.8 trillion yen - (nearly $54 billion).

Bernanke's Bank of Japan speech

Interesting speech by Ben Bernanke, Chairman, U.S. Federal Reserve. He sizes up the Bank of Japan's past responses and critiques their quantitative easing bait and switch:

http://www.yomiuri.co.jp/dy/business/20090129TDY19104.htm

It's a matter of confidence

There's lots of reflecting going on at the World Economic Forum in Davos, Switzerland.

And getting to the crux of the matter, the director of the Global Security Research Institute in Keio, Japan, Heizo Takenaka, said “The current situation is something more than a financial and economic crisis,” Mr. Takenaka said. “We face a confidence crisis. Once the confidence of crisis occurs, we need a strong government and central banks.”

Any one from Japan knows of what they speak. A crisis in confidence caused their deflationary recession to last over 13 years.

Chinese Premier, Wen Jiabao, clearly wants to take the optimistic path. “The harsh winter will be gone and spring is around the corner,” he said.

Mr. Wen was also realistic in his assessment, noting the drop in exports and unemployment, but he was clear in his government's 2009 goal of 8% growth. With a stimulus package of 4 trillion yuan, Mr Wen talked about growing domestic demand after "years of being the workshop of the world."




http://www.nytimes.com/2009/01/29/business/29econ.html

Happy Niu Year

It's here! Year of the Ox...

Here's one of my favorite new quotes, "A downturn can be a very good time for restructuring the economy" -
Ma Jiantang, China's National Bureau of Statistics commissioner.

In 2008, China's overall economy expanded 9%. (The last three months of the year were lower at 6.8% expansion).
2007's rate was 13%.

My other favorite quote, (same guy), "Just like the freezing weather we had this morning, it will not last forever."


http://english.aljazeera.net/business/2009/01/200912241324835704.html

International Retailers Continue China Expansion

US retailers are feeling confident about China's continued growth. (Maybe the focus of China's economic stimulus plan on encouraging its citizens to spend has helped). Of course, the validity of Chinese government released data is always under dispute, but the numbers show over 20% growth in December, despite surveys that say Chinese consumers are cutting back.

Thursday's Wall Street Journal reported the following expansion by international retailers:

Ikea - plans 2 stores in 2009, currently has 6 stores in the country.
Walmart - currently has 217 retail stores
Carrefour- plans 28 stores in 2009, up from 22 in 2008.
Tesco (UK) - continued expansion
Parkson Group (Hong Kong - opening 4 or 5 stores, currently have 42 department stores.

Notably, Aeon (Japan), is delaying 100 stores to Feb 2013.

The WSJ suggests that as they did in Tokyo in the 1990s, retailers may take advantage of falling real estate to buy desirable retail spaces, saving them leasing costs in the future.

Stimulus package comparison

A lot of stimulus package numbers are being thrown around, so I'm trying to make sense of them. This is what I've come up with (for now)

Japan:

Under Aso's Cabinet: 64 trillion yen, (over US $700 billion) called "an emergency program of livelihood protection" Combined with an earlier package worked out under former Prime Minister Yasuo Fukuda's Cabinet of 11.5 trillion yen - puts total economic recovery measures at 75 trillion yen (over US $827 billion).
Addressing: the deteriorating job market and stabilizing the financial market
Specifics: offering housing to jobless people and stabilizing the financial market.
help dismissed workers such as temporary workers find housing; encourage employers to maintain employment and address problems concerning cancellations of informal job offers to students.

China

China (Nov 08) $600 billion which includes more government investment in infrastructure, tax deductions for exporters, and bigger subsidies to the poor and farmers.

China's package amounts to 14 percent of its likely gross domestic product (GDP)

US

The Emergency Economic Stabilization Act of 2008, commonly referred to as a bailout of the U.S. financial system: $700 billion passed in Oct 2008. The idea was that $250 billion would be used right away, $100 could be released by Pres Bush and the remaining $350 was to be released by Congressional vote (it was on January 14, 2009). What was actually released and promised, including to the car companies, goes something like this:

December 19, George W. Bush announced that he had approved to provide $13.4 billion now, with another $4 billion available in February 2009General Motors will get $9.4 billion and Chrysler $4 billion.

Separately President-elect Obama proposed as of Jan 14 '09:
$825 billion fiscal recovery plan called the American Recovery and Reinvestment plan.
$550 billion in new spending and $275 billion in tax relief middle class tax cut.




http://www.yomiuri.co.jp/dy/national/20081220TDY02308.htm
Extra! January 2009

Japanese consumption tax

It's strange hearing Prime Minister Aso talking about a consumption/sales tax increase in 2011.

I can see the logic in the terms of Japanese deflation fears; maybe saying things will be more expensive in two years, will incite people to buy now.

At the same time, folks need their leaders to inspire confidence and talking taxes seems more like a stick than a carrot.

Asian Robots

The top three countries for robot density (measured as number of industrial robots per 10,000 manufacturing workers) are all Asian - Japan (an eye popping 295), Singapore (169) and South Korea (164).

But when the regional averages are taken into consideration, Asia/Pacific falls to third place (27) behind Europe (50) and the Americas (31). This suggests that the two largest Asian countries, China and India, are way behind the curve.

When I dug a little deeper, I found 2008 numbers showing India and China significantly increased. China increased 14% from 2006 to 2007, while the industrial robot count increased by 11% in India.

See http://www.worldrobotics.org/downloads/2008_executive_summary.pdf for the full report.


http://spectrum.ieee.org/print/7012

China 2008 tourism down

2008 was supposed to be a banner tourism year for the China. Remember the Olympics? They were in August, yet, according to the Wall Street Journal (1/9/09), the year ended with an overall drop of two million visitors.

2008 marked the first decline in visitors to China since the 2003 SARS scare.

China's National Tourism Administration reported that there were 130 million inbound travelers in 2008.

This hasn't slowed down the Walt Disney Company's bid to build Shanghai Disneyland, a $3.59 billion theme park. Disney is actually counting on drawing visitors from mainland China itself. (Disney currently operates parks in Tokyo and Hong Kong).

The deal is far from done. China's central government needs to approve the Shanghai proposal and that can take some time. The government may be tempted by the 50,000 new jobs the park could create as China focuses its economic recovery on growing markets within their borders.




----
Wall Street Journal, 1/9/09 and 1/10/09.

Less Chinese money available to U.S.

A lot has been written lately about China focusing their stimulus efforts internally. The question looming for the U.S. is what is China going to do about their hefty U.S. public debt investment.

China is currently the largest holder of U.S. public debt, particularly Treasuries. But now that China is focusing on paying for its own stimulus package, who will finance U.S. debt?

China only recently surpassed Japan as the largest Treasury debt holder, so it makes sense that Japan would reclaim the crown.


It's a lot to debt. During the first part of 2008, China spent close to $50 billion per month on American bond markets.



http://www.nytimes.com/2009/01/08/business/worldbusiness/08yuan.html

The upside of a strong yen

The yen is weakening against the dollar. Just a few weeks ago, the dollar was at 88.78 yen. Today it was at 93.27 yen. This is good news for exporters and the Nikkei rose for the sixth straight session in response. But there's an upside to a stronger yen. Japanese trading companies are looking to use that yen to acquire non-Japanese businesses.

Today's Wall Street Journal reported "the stronger yen makes purchases cheaper and potential competitors are sidelined by the credit crisis" .. and ... "After years of restructuring, Japanese firms are sitting on about $1.25 trillion in cash."

Marubeni Corp and Itochu Corp are essentially scooping up cheap assets when no one is looking. I guess I shouldn't say that, plenty of people are looking, but their hands are tied by the unavailability of financing.

Marubeni Corp has been focusing on infrastructure investments as well as energy, machinery, commodities and food businesses. Relationships continue to be vital as Marubeni's acquisitions have transpired through existing business associations.

Itochu Corp has been particularly active and focusing on food distribution, energy and mining.

Of course, the profit picture won't look good when the foreign currency is converted back to the strong yen, but this is for the long term. When the economy improves, the investments will pay off handsomely.

Year of the Ox

2009 in the Chinese zodiac is the Year of the Ox. The traditional Chinese calendar is lunisolar, and this year's new year date is January 26. (Japan has followed the Gregorian calendar since the Allied occupation).

Since the ox symbolizes prosperity through hard work, many in Asia are expecting a New Year bump in the markets. It would be nice if the bump was sustainable, but with the credit card bubble and fourth quarter results yet to break, it is unlikely in the the near term.

There are hopes that China will help bring the world out of the global downturn, but China's government has made it clear that they are focusing on domestic stimulus. It's quite a daunting task to turn an export reliant economy into a domestic one.

The risk averse ox truly epitomizes the Chinese people. Most Asians dislike any kind of debt. And the dependable ox has a strong stubborn streak. The question is will the government be flexible enough to adjust if their population's response to increased spending falls short?