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Friday, August 29, 2003

Hypotheses Non Fingo

Hypotheses Non Fingo said Newton, meaning thereby 'I do not feign' hypotheses. Of course ever since he said it endless debate has revolved around the meaning of 'fingo'. I - following Alexander Koyre - understand him to mean feign, and not as others would have it frame. Well this is what I have been doing a lot of recently - framing I mean, not feigning - and I imagine this is something scientists need to do all the time.

Some of my favourite hypotheses about networking and immigration clusters have come and gone a number of times already this week, but I do think it is important to keep formulating and reformulating them. Formulate or die! The other important thing is to be flexible enough to change them. I have noticed that in some kinds of research the computer game model is extraordinarily applicable: there is a puzzle and you don't know what to do or where to press so you try hit and miss. Suddenly you hit the right slot and you're through to the next screen. (I, of course, was brought up on a much earlier generation of computer games). Then even though you may collapse things and have to start again you can always get up to the frontier fairly quickly. Once there you again have to wait, until you press on another sensitive spot and off you go again. Many kids who have grown up without reading books, but playing computer games, may, in fact, make good scientists if this kind of analogy has any validity. What I notice in interviewing people is that it is like a sort of sophistocated guessing game. You have to give the right clue, and then out it drops: the answer you were (or weren't) looking for (depending on your initial hypothesis). Of course, if you didn't frame hypotheses you wouldn't have any questions to ask.

The Seamier Side of Political Life in California

Tacitus has been causing a fair bit of controversy in California with a piece about Cruz Bustamante's links to the radical Chicano group MEChA during his student days. While everyone esle seems worried about where big Arny would take the golden state, deap seated changes which seem to revolve around the rise of the Chicano vote, do seem to be on the horizon. Tacitus's question about just why Bustamante hasn't renounced this part of his past seems a perfectly reasonable and legitimate one.

If Arnold Schwarzenegger can be hounded by Tim Noah for his social support of Kurt Waldheim, then surely it's fair to query Cruz Bustamante about his collegiate affiliation with the Movimiento Estudiantil Chicano de Aztlán, or MEChA.

....Bustamante attended Fresno State University, where he served in the student senate and began dabbling in community politics, learning about partisan politics first-hand. "I wasn't the most radical Mechista [M.E.Ch.A, which stands for Movimiento Estudiantil de Aztlan, is a Chicano student organization known for its ethnocentric views]. At the same time, there were a lot Vietnam veteranos attending school. They were like big brothers, and they taught me a lot."
It's tempting to dismiss this as a youthful affiliation that means nothing today -- but that temptation would be wrong. There are certain associations that are socially tainting (and justly so) in the modern day, and they don't have statutes of limitations. Former Klansmen and former Nazis don't get a pass unless they spend a great deal of time and energy apologizing for and explaining themselves in a convincing manner. (This rule doesn't apply to former communists, of course, because they mean well). MEChA -- which exists mostly as a series of student organizations at universities across the country -- is premised upon the notion of a distinct "Chicano" race with an inalienable right to a homeland called Aztlán, encompassing roughly the area ceded by Mexico to the United States in 1848. This isn't benign ethnic identity politics (inasmuch as such politics can be benign) -- as the rhetoric from the founding documents of the movement make clear.

Mechista fellow-travellers are people like Professor of Chicano Studies at the University of New Mexico Charles Truxillo, who proposes the formation of an Aztlán-style polity called La Republica del Norte "by any means necessary." Truxillo is a self-described disciple of Chicano "activist" Reies Lopez Tijerina, whose primary contribution to the struggle was to lead an armed gang into the courthouse at Tierra Amarilla, New Mexico in June 1967; once there they shot two court employees in cold blood, severely beat a third (all three were Mexican-Americans), and took twenty hostages before fleeing. Truxillo's political justification for the formation of his desired Republica closely parallels the nutcase theories of neo-secessionist and neo-Confederate movements in the American southeast.

Mechista fellow-travellers are also people like Hector Carreon and Ernesto Cienfuegos, who vigorously tout the idea of Aztlán via their website. I wouldn't click on this link at work -- aztlan.net is a hate site as surely as any Aryan Nations site is. Their target of choice? The Jews, of course. As with MEChA proper, Carreon and Cienfuegos generally don't get called on their true colors when they pop up in the mainstream press. Former LA Times columnist Agustin Gurza, who has written before about racism in Latino communities, described aztlan.net as merely "an online Whittier-based Chicano magazine."

The confluence of the fringes -- Islamists supporting anti-Semites supporting secessionists supporting Chicanistas supporting communists -- is not new phenomenon. But it is disturbing nonetheless, and those who participate in it deserve to face some tough questions.

Which brings us back to Lieutenant Governor of California Cruz Bustamante. He "wasn't the most radical Mechista," but he was a Mechista, with all the baggage and bad company that entails. I don't think, as Lowell Ponte does, that Bustamante secretly considers himself a future ruler of the Alta California province of Aztlán. But I do think he's morally compromised by his past with this group and this ideology, and it's something he must face squarely and publicly. Association with known racists combined with racist Freudian slips in the recent past would have already raised the hackles of every self-described "progressive" from the Oregon border to San Diego if he had an (R) after his name. Why not now? With a new poll showing him leading Schwarzenegger, Californians deserve nothing less from the man who may well be their next governor.

Turkey's Rapidly Growing Economy

Much as we try, we can't always sparkle. Today Stephen Roach has a pretty boring piece about globalisation. I say pretty boring because I think right now he's run out of things to say. The reason is obvious: as he says he's a card carrying skeptic, so he has now to wait and see. The piece on globalisation is only a re-run of things he has said before, and not all of them are 'state of the art'. This is where being a blogger is a definite advantage, as while you are waiting you can entertain yourself - and others - with something completely different. Anyway I'm not a card carrying anything, let alone a skeptic! I just want to understand what is happening. If things are going in a direction I don't expect, then this isn't a problem, it is interesting. It just means you have to change the theory a bit, that's all. Meantime Morgan Stanley do have an interesting piece on Turkey. Turkey, as the article says "seems to us en route to becoming one of the fastest-growing economies in the world" just what my demographic thesis would predict. No need to make too many changes yet!

The Turkish economy is on a rebound, we believe, but without creating any jobs. Real gross domestic product expanded by 8.0% year on year in the first quarter of this year, which implies a seasonally adjusted annualised growth rate of 12.2%, according to our computations. Turkey seems to us en route to becoming one of the fastest-growing economies in the world. Nevertheless, a recovery in general economic activity does not necessarily mean an immediate healing in the labour market. In fact, the current business cycle has turned into a jobless recovery. The unemployment rate climbed to a peak of 12.3% of the civilian labour force in the first quarter, from 5.6% in 2000. Since the beginning of economic troubles in the fourth quarter of 2000, over 2.5 million jobs have been lost in Turkey, and the output recovery has so far failed to bring new opportunities to the labour market.

The divergence between output and jobs is bad news for income growth and public finances. Demographic shifts and the state of the labour market were critical factors in determining the outcome in the November 2002 elections, and improving the outlook for millions of job seekers is still a daunting task for the ruling government. The unemployment rate may have dropped over two percentage points to 10% in the second quarter, but mostly because more people quit looking for work and dropped out of the labour force, in our view. The participation rate declined to an average of 48.5% in the first half of this year, from 51.4% in the second half of 2002. In fact, the jobless rate excluding the agriculture sector rose from 8.2% before the crisis to 15.1% in 2002 and improved marginally to 14.6% this year.

The current state of the labour market is especially devastating for the young and educated. The unemployment rate has risen across the board, but those aged 15-24 with above-high-school education endured the sharpest rise in unemployment over the last two years. The unemployment rate for the young and educated increased from 20.3% before the crisis to a peak of 31.1% in the third quarter of 2002. Although it decelerated to 25.6% in the second quarter of this year, Turkey’s young population continues to suffer more than other segments of the labour market. For example, the jobless rate for urban youths with qualifications stands at a disturbing rate of 28.1% -- almost three times the average unemployment rate.............

Sustainable economic revival and job creation need a further drop in real interest rates. With an average age of 26, the Turkish economy needs to become a dynamic job machine. Contrary to conventional political opinion, we think the economic stabilisation programme is not contractionary at all. Supported by structural reforms, fiscal tightening would reduce the public-sector borrowing requirement on a sustainable basis. In return, the declining real interest rate reduces the crowding-out effect and encourages private investment. In fact, the most important reason for disappointing job creation has been the lack of private investment, which contracted by 34.9% in 2001 and 7.2% last year. Though we project an annual growth rate of 15.2% in private fixed investment this year, gross fixed investment (including the public sector) would still be lagging behind the real GDP growth rate, which has so far been driven mainly by an unusual inventory accumulation...........

The excess supply in the labour market eradicates the risk of overheating of the economy, in our opinion. Every cloud has a silver lining, and the excess supply in the labour market has made a significant contribution to the disinflation process. The consumer price index posted an annual increase of 27.4% in July, down from a peak of 73.2% at the beginning of 2002. According to our calculations, the seasonally adjusted annualised inflation rate declined to 17.0% in July, from 30.8% in May. We observed an even more marked deceleration in the annualised “core” inflation, which plunged to 13.8% in July from a peak of 28.8% in April. In our opinion, besides real currency appreciation and tight monetary conditions, a limited recovery in the cumulative output gap eliminates “pipeline” inflation pressures in the short run. This is why we project a year-end inflation rate of 19.2%, along with an accelerating growth prognosis.
Source: Morgan Stanley Global Economic Forum

On the Generation Gap 4

My son is now in Australia, getting some medical practice before he enters his final year and, at last, qualifies as a doctor. Here he is reflecting on the conservative attitudes of many in his generation, and of the deep conformity which appear to lie behind the veneer of adventurism and difference.

I think I'm really learning a lot about 'people' (funny as that might sound). I'm in a hospital in sydney at the moment doing orthopaedics and having a great time playing the surgeon. The orthopaedics is good and I've seen some pretty gruesome stuff (I would typically say amazing here but it would just be bad taste). I assisted in a below knee amputation of the leg yesterday evening after some guy threw himself under a train.

As ever though the dilema is to stay on studying or bugger off down the coast to have some fun! (I think the latter shall soon win out). The people you meet on the road though are a real weird selection (and yes I am aware I'm one of them... but I'm weird in a normal way... a lot of these travellers are just plain idiots). As a friend of mine said .... travelling is the finishing school of the middle classes... and I'll be darned if he's not right. Most of em go to uni... get
their degree.... can't decide what to do cos their degree isn't actually much use to them and then bugger off around the world for a bit (firstly as an escape and secondly so that when they are grand-dads or else are just sitting around in the pub they can pretend they did something interesiting once in their life... that other people haven't done.... but in fact most people (like them) have travelled to phuket, bangkok, laos, machu pichu et al etc .... and actually most people(like them) have done all that stuff and infact not learnt anything about the places they've been to! I'll be darned if any of my mates have... learnt much that is (about vietnam or chile or peru etc etc)!) I do realise I'm rambling here.
I think its because The only people who get to do all this stuff are those with the chioce to do it so most of the brits and frech and germans and spanish etc etc are of the same mould in a weird sort of way. Obviously you can draw some pretty interesting conclusions from that.

I suppose its like those kids in america who dress up in the goth clothes (you know- all the black eye-liner and leather jacket stuff (the marlyn manson bunch)) are trying to do their own thing and be 'different' but end up looking just like everyone else... i think the same can be applied to the backpakers I've met over here. They all strike me as rather similar and a lot of the time really bloody boring. Of course there are exceptions though.I do however love Aussies.... and a more rascist bunch i don't think i've ever met! (apart from of course most indians)

There are a few other students from overseas here (mostly english) and I'm surprised by the ease at which I find being over here on my own. By that I mean I'm pretty happy just doing my own thing. I think that its sort of revealing how people act when they don't know you from Larry but are also looking for some friendship (I think a few 'em are all a bit daunted by it all). Its amazing how bloody niave some of the people you meet within the world of medicine are.I met a girl while I was travelling on the way up from adeliade to melbourne who was 18 and had just finished school. She was from South africa (an afrikaans I think) and was about to start uni in Holland (as a medical student funnily enough but thats not important). She'd been out here for around 4 months spending the whole time travelling on her own. Real adventurous type but not stupid or reckless, just sensible. Well needless to say I was impressed by her gumpshun (just getting up and going off on her own). Then I arrive at the hospital in Sydney and meet some of the students staying here. Well most of them hadn't even left the hospital let alone sydney! Imagine coming all the way to Australia (or anywhere in the world for that matter) and not trying to see a bit of the country... crazy! There is one girl here, she's around 23, from London- ... I suggested she travelled around for a bit, maybe up the coast to Fraiser Island (which is by all accounts one of the most incredibly beautiful islands in the world!). She looked at me in horror saying that there's no way she could travel around on her own ... it would just be simply too dangerous! I let out an inward sigh. People really don't know what they are missing.

Things Don't Look Too Good for Tony Blair

I obviously have no special information to offer about the recent conduct of Tony Blair. What I do feel is that Blair gambled big time on the question of WMD. I, for one, believed him. Now I don't know what to think. I'm no specialist in WMD's and have no idea where they are or who has them. What I do know is that we took a leap in the dark in terms of international law by accepting a military intervention in order to head of a major human disaster. Now it's not clear that this intervention was justified on these grounds, so it seems to me logical that those responsible should accept the consequences. Socrates, reputedly, put the sanctity of the Laws above the value he placed on his own life. Our institutions are more important than the career of any one politician. This is a pity, since the general approach of the Blair government, including the theory of the 'third way' seemed to me to be a reasonably pragmatic and positive attempt to take the UK forwards to the future. If Blair goes this will produce important stability problems in UK politics, this is why I thought he wouldn't play the WMD card without more substantial evidence. I was wrong. Now I think both him and me have to accept the consequences.

A current Poll suggests that 63 per cent of the British public believe British Prime Minister Tony Blair failed to restore his credibility yesterday after his historic appearance before Lord Hutton's judicial inquiry into the death of government scientist Dr David Kelly. Blair has staked his premiership on the outcome of the Hutton inquiry yesterday when he insisted that he took 'full responsibility' for key decisions leading to the unmasking of David Kelly."

While some supporters have praised him, following his U-turn admission that he took a central role in naming Kelly, others have focused on the fact that Blair was forced to admit yesterday that he was personally responsible for Dr David Kelly's identity being disclosed, in direct contradiction to his denial at the time of the scientist's death.

Kelly, 59, died in an apparent suicide after his name was revealed as a "mole" for a BBC story criticising the government for making intelligence about Iraqi weapons "sexier" in a dossier. Many believe that the inquiry should not overlook the possibility that Dr Kelly was murdered—as the absence of evidence suggests a cover-up at the highest levels of the British state. On Thursday Blair defended the dossier saying it was the best intelligence at the time and revealed he had played a key role in the government strategy of revealing Kelly's name if it was put to them. In Britain the affair has inevitably been compared with the Watergate scandal that engulfed President Richard Nixon in the early 1970s and eventually forced his resignation. Consistent with the Watergate scandal, Blair has chosen to make the conduct of the press the issue, not that of his own office. Blair's resignation should follow.
Source: OfficialSpin

Thursday, August 28, 2003

Chongqing, China's Gateway to the West?

First of a series of pieces by Andy Xie that I missed while I was on holiday.

Chongqing markets itself as China's Chicago. It is situated at the upper reaches of the Yangtze River, about 1,500 kilometers from Shanghai at the river's mouth. Its population is 31 million, of which 11.3 million are urban. The city was part of Sichuan province and was elevated to provincial status to better handle the Three Gorges Dam project. It is quite hilly, surrounded by high mountains that trap the summer heat within, when temperatures hover around 40 degrees Celsius. Its population centers are separated into pockets by steep hills. Tourists usually come here to embark on the Three Gorges tour, but seldom spend much time in the city itself.

Chongqing probably came into existence as a trading port, linking the rich Chengdu plain with the rest of the country. Its culture has been shaped by the harsh working conditions at the port. The enduring image of the city is rows of coolies pulling boats from the shore into navigable waters. Cheap muscle power defined the city.

Chongqing is not rich, but people enjoy a comfortable life. We estimate that per capita income is about US$850 for 2003, or one-third the level of the coastal areas. However, prices are about 30-50% lower. Foodstuffs are plentiful, of good quality and cheap. Housing is still dominated by public housing compounds -- spartan concrete blocks with small units.

The local economy is totally dependent on investment. Fixed capital formation accounted for 47% of GDP last year and probably more this year. It was 35% in 1996. However, investment cannot support the economy forever, as the infrastructure set up would not be able to create value without competitive industries to take advantage of it. On that score, the jury is still out.

Huge investment in the Yangtze Delta eventually paid off in the form of that region’s export success. The region now accounts for one-third of China's exports. Chongqing's export industry, however, takes a week longer than the coastal region to turn around goods, and thus suffers a severe disadvantage in the export market.

However, geography does not rule out exporting goods. Although Chongqing cannot compete in bulky consumer products that require rapid turnaround, it could succeed in higher value-added products that are not time-sensitive. The city's exports reached US$1.1 billion last year, or 4% of GDP, but grew by 46% in the first half of this year. It is conceivable that its exports could triple in five years, which would go a long way to paying for the current investment boom. To achieve that, I believe Chongqing needs to overhaul its productive sector.
Source: Morgan Stanley Global Economic Forum

The Secret of a Longer Life

This is certainly good news. I'm off to the Bulgarian restaurant here tonight, and this is the best excuse I've seen recently for having a 'nice glass of red'. No Bulgarian Cabernet Sauvignan on the wine list unfortunately, but the local Spanish red - Castillo de Enguera - as furnished by the Bulgarian manager of the wine 'cave', is very acceptable. In fact the restaurant seems to be the place to hang out for the 'old hands', those who have been here over five years, and have risen to form an integral part of the local 'new technocratic elite'. Tomorrow night it's a Rakia evening with some of the less fortunate new arrivals who spend the day picking peppers in the heat of the mid-day sun. This is hardly to be recommened on health grounds. Nor is the shopska salata and purzheni kartofi sus sirene which tend to accompany the ritual. The latter dish is essentially chips under a layer of grated cheese. It is however, very very nice.

An ingredient of red wine extends lifespan by up to 70% - in yeast1. The compound seems to mimic the age-enhancing effects of calorie restriction on the single-celled organism.

Capitalizing on the chemical, called resveratrol, is a long way off in humans, says David Sinclair of Harvard Medical School in Boston, Massachusetts, who led the research. To match the yeast doses, he says, humans would need to drink a glass of their favourite vintage morning, noon and night.

But the research may help explain why red-quaffing Mediterraneans live to a ripe old age. Resveratrol boosts levels of an enzyme called Sir2, which is thought to extend lifespan by stabilizing DNA. "It's highly plausible that boosting enzyme activity will slow functional decline in old age," agrees Peter Piper, who studies ageing at University College London.

Resveratrol is one of a group of chemicals called polyphenols. Previous research has suggested that these can protect against heart disease and osteoporosis in humans. "It may not be just a longer life - it may also be a healthier one," says Sinclair. The compound is one of 17 plant molecules so far found to extend life in baker's yeast (Saccharomyces cerevisiae). Resveratrol also gives fruitflies, which typically live for around a month, an extra ten days of life, says Sinclair. Studies on mice are in the pipeline. Sinclair gave his yeast fresh grape extract. Normally, the organism divides around 25 times and then dies. Resveratrol-treated yeast underwent an extra 15 replications. Many polyphenols are also found in tea, fruit and vegetables, says Piper. "It stresses the importance of eating a healthy, balanced diet," he says. Pharmacologists are also developing a stable, slow-release resveratrol pill.
Source: Nature

US open to leadership role for UN in Iraq?

Don't miss this one from today's FT:

US and allied forces in Iraq could be placed under United Nations leadership but commanded by an American, according to a senior US official describing the search for a new and more internationally acceptable Security Council resolution defining the role of the occupying powers.

Richard Armitage, the deputy secretary of state, said the formula was one of several ideas being "explored" at the UN. While a State Department spokesman clarified that this was "not an idea that we are necessarily putting", the proposal is likely to fuel a debate within the Bush administration on the degree of dominance the US wants to maintain in Iraq as its casualties and costs mount.

According to a transcript of an interview released by the State Department on Wednesday, Mr Armitage, who has clashed before with hawks in the Bush administration, said one proposal was "a multinational force under UN leadership, but the American would be the UN commander". He declined to give details but said "widening decision-making" was also under discussion. In reply to another question, he said "one of the interesting ideas" was for the US to maintain control of the military while the UN took over civil affairs.
Source: Financial Times

On Exporting Men and Technological Leapfrog

In the mailbox, Joerg has some reflections on my China post yesterday, and on the potential for third world technology leap-frogging.

Your latest post on China reminds me of a quote Schwartz uses in the book. In the Wilhelmine era, German chancellor Count Leo von Caprivi said: "We must export. Either we export goods or we export men. The home market is no longer adequate." China would then seem to be the first country that needs to do both. (Of course, the real point is the misguided ideology expressed in the quote. Communist China may well have moved along a path fairly close to the optimum since Zhou En Lai´s reign, but there certainly are no guarantees it will do so in the future.).............

You obviously rely on Schumpeter for part of your argument. I see several weaknesses in his theses. Long cycles are characterised by substitution of primary energy sources. While developments in the energy sector certainly contribute to the rise or downfall of individual entrepreneurs - Rockefeller is a name that comes to mind -, the process of energy substitution itself is accelerated (or held back) by political decisions. Without highways, there would be a reduced demand for automobiles and oil. A recent German study suggested that China would be the first country to boast a hydrogen economy. Such an outcome would not be due to the creativity of the Chinese - all the technological pieces of the puzzle are in place already. The problem is that the "early adopters" of such technologies are not individuals and small companies but those that finance, regulate, build and operate grids and networks that ensure distribution and supply.

Work on electric cars has been continuing for about one hundred years now. That is how old the discovery of the basic principle they are based on is! (BTW, fax technology was invented at the same time - many decades before it took off commercially).

I can make sense of Schumpeter´s term "overinvestment" - if I twist it a bit. Firstly, we would have to separate stock market investments from real investments by companies listed on the stock market - i.e., separate the undeniable maniacal excess from the uses the more sensible companies put it to. It is just not true that there is a lot of optical
fibre in the ground that will never be used, e.g. Secondly, the war in Iraq was a misguided investment in oil. A back-of-the-envelope calculation shows that levying a tax on gasoline to encourage energy savings and then investing the proceeds into subsidising/tax-exempting the energy infrastructure of the future would have been a much more efficient course for the U.S. to take.

The situation with technological leapfrog is really fascinating. There is a standard problem in conventional economics known as the 'incumbents problem'. Simply put this implies that those that have have an inbuilt interest in strategic defence rather than innovation - read Coca Cola, read Disney, read Microsoft. The incumbent, and in particular in the context of the new economy, increasing returns dynamic defends what it has. Now the interesting point is that this can be extended to states. States have infrastructure, and tend to be conservative in adapting to the new. With technological change in constant acceleration mode this becomes very important. We now have the exciting possibility that some of those perennial third worl technological outsiders could become the early adopters of some of the next generation technology. Joerg's example of alternative fuel sources for transport needs is just one, China and India do not have the same investment in gasoline station networks. wCDMA could be another case. It is clear that what appeared to be a decisive European UMTS lead three years ago could in fact turn out to be a milstone round our necks as both China and India may go for the much cheaper 2.5 generation upgrade. And then watch out, since any first in new technology in the third world would be an enormous confidence booster.

Most of China's state-owned telecom operators are likely to adopt the WCDMA 3G standard, Dow Jones reported. This would be a blow to the companies that are backing alternatives, including Qualcomm, which is developing cdma2000 technology, and state-owned Datang Telecom, which is the main developer of the TD-SCDMA standard. However, Dow Jones reported the final decisions are still some way off, as the Chinese government is yet to issue operators with business licenses for 3G mobile services, and hasn't given any indication when it will. "The ideal timing for the issuance of 3G licenses remains a topic of hot debate within government circles," Norson Telecom Consulting said in its report, but added it's likely each of the four major operators will get a license in the second half of 2004. The plans for two of those operators are fairly clear. China United , is focusing most of its energy on its CDMA2000 network and is likely to follow the established upgrade path to the 3G version, CDMA2000.

China Mobile is expected to adopt WCDMA, which is considered the easiest upgrade for its GSM standard network. The wild cards are China Netcom and China Telecom Group, which don't have conventional mobile phone networks and so don't face upgrade issues. Norson argued that both are likely to choose WCDMA. "China Telecom... has halted TD-SCDMA testing and shifted its focus to WCDMA. China Netcom, in line with strategic partner Singapore Telecom, has also shown a preference for WCDMA," the Norson report said.
Source: 3G News

Alcatel announced that R&D in 3G will constitute a significant portion of the $US 100 million R&D investment in China this year. In addition to R&D, investment in 3G infrastructure and application development in China will be increased by $US 45 million. This substantial commitment will further be used to strengthen its R&D, localization, and the 3G Reality Centre to support China's 3G development.

With the enhanced 3G capability, Alcatel Shanghai Bell, will be able to firmly support operators in China as they prepare for 3G commercial deployments. The company's 3G Reality Centre in Shanghai, which provides a fully-featured and live 3G environment for testing innovative applications and services with local partners, will also be further enhanced to meet the fast growing demand for new mobile applications in China.

The 3G Reality Centre in Shanghai has already conducted laboratory and field trials on 3G infrastructure and new mobile applications in China. The Centre is also the heart of Alcatel's 3G Reality Centre network in Asia Pacific and is connected online to an equivalent Centre in Paris

"We firmly believe that China, an emerging hotbed of mobile applications, will take on a leading role in the field of 3G worldwide," stated Philippe Germond, President and chief operating officer of Alcatel. "Alcatel is fully committed to partnering with Chinese operators to develop successful 3G services, bringing our industry-leading solutions, world-class R&D, global experience and building this into a full long-term applications capability within China."
Source: 3G News

The IMF Has Sprung a Leak

The IMF is apparently warning the US about its deficit problems. Perhaps the most incredible thing about this report is that it is a leak of something which is due to appear next month. The time horizon on which we operate and react seems to be reducing continuously:

The US will remain the main engine of growth for the global economy but needs a plan to control its swelling budget deficit, the International Monetary Fund has warned. Leaked drafts of the IMF's twice-yearly world economic outlook, due to be released at its meetings in Dubai next month, show upward revisions to US growth predictions and a downgrading of growth prospects in the eurozone.

The latest figures show the global growth forecast slightly higher than the IMF's previous prediction in April, at 3.2 per cent in 2003 and 4 per cent in 2004. The US forecast has been revised up to 2.4 per cent this year and 3.7 per cent next year, with the eurozone forecast more than halved to 0.5 per cent this year.............The report warns that while fiscal stimulus has helped keep the US and global economy going, there is no strategy for returning public finances to balance in the medium term. "Implementation of a credible medium-term framework to restore broad balance . . . over the cycle is now even more pressing." The report, on which the IMF declined to comment on Wednesday, represents an intensification of the fund's warnings that US tax cuts and public spending will create a structural deficit, ultimately pushing up interest rates and restraining growth.
Source: Financial Times

Eurostat Population Data

Something I forgot to link to last week, the latest Eurostat data on European population. Most notable here are the figures for the 'acceding' or 'transition' countries:

On 1st January 2003 the population of the EU was 379.0 million and that of the euro zone 305.6 million, far behind China (1 283 million) and India (1 042 million) but in front of the US (289.0 million). The EU population increased by 1 290 000 in 2002, an annual rate of 0.3%1. The rise in the EU population was around 2% of the 74 million increase in the world's population in 2002. The main contributors to world population growth were India (with an increase of 15.6 million, or 21% of the total world increase), China (+7.9 million or 11%) and other developing countries (+47.3 million or 63%).

Net migration accounted for almost a million, or three-quarters, of the EU population increase in 2002, with natural increase accounting for the rest. Natural increase has been below net migration since 1989. The United States recorded a population increase of 0.9%, three times higher than in the EU, with natural growth accounting for nearly two-thirds of the increase. Japan, with 127.1 million people, recorded an increase of 0.1%, due solely to natural growth.

The population increased in all the EU Member States in 2002. Largest increases were recorded in Ireland (15.2 per 1000) and Luxembourg (9.5‰) and lowest in Germany (1.2‰) and Italy (1.4‰). On the other hand, the Acceding countries4 recorded a drop in population of 0.1%. Six out of 10 recorded a fall with the biggest declines in Latvia (-6.1‰) and Hungary (-2.2‰). The population increased in Cyprus (+14.5‰), Malta (+6.7‰) and Slovenia (+0.5‰), and remained stable in the Slovak Republic.

Within the EU, the highest natural increase rates (difference between the number of births and deaths per thousand inhabitants) were observed in Ireland (+7.9 per 1000), France and the Netherlands (+3.7‰ each) whereas the rate was negative in Germany (-1.5‰), Italy (-0.5‰) and Greece (-0.2‰). The population would have fallen in these three Member States without positive net migration. Net migration was higher than natural increase in every Member State in 2002, apart from France, Ireland, the Netherlands and Finland. Positive net migration was recorded in 7 out of 10 Acceding countries. The exceptions were Latvia, Lithuania and Poland.

The total fertility rate5 in the EU in 2002 remained virtually unchanged at 1.47 children per woman compared with 2001 and 2000. However there were some notable increases in Germany from 1.35 in 2001 to 1.40 in 2002, and in Sweden, up from 1.57 to 1.65, with the highest value recorded by Ireland (2.01) and the lowest by Greece, Spain (1.25 each) and Italy (1.26). Among the Acceding countries fertility rates only ranged between 1.17 in Czech Republic and 1.57 in Cyprus (2001 data). In the US the fertility rate in 2002 was 2.06, in Japan 1.37 and in India 2.98.

Wednesday, August 27, 2003

The Problems of Finding a Wife in China

Another dimension in the 'demographic time bomb': China's shortage of women of marriageable age.

More boys than girls are born in China, making the gender ratio imbalance one of the most serious problems facing the rural population, a senior Chinese official said yesterday. For every 100 girls born in China, there were about 16 more boys brought into the world, according to national census statistics in 2000. In other countries, only five to seven more boys than girls are born. There are 70 million men in China who are unable to find wives. Men outnumber women as a result of the country's one-child policy which leads to many female foetuses being aborted as girls are traditionally discriminated against.
Source: Straits Times

BTW no apologies for using the 'demographic time bomb' expression. It obviously isn't mine, and I don't really like it. But I can't make up my mind who irritate me most, the people who dream up these expressions, or the people who love to cite them saying 'there is no such thing as..........' Well of course there is. Incidentally my thanks to Peking Duck for putting up the link. If you want to follow up this topic, you could start with this excellent post from Water , also found on Peking Duck (who oddly enough I now note is based in Spore). The quality of China blogging is on the up and up.

Get Your Bopomofo Level Up Now

Since China is the coming thing, it might be useful for all of you out there to start to work up your bopomofo now. Pardon me, your what?

Once I get settled down, the first language thing I'm going to do is learn bopomofo. Bopomofo is a 36-character "alphabet" which is used to write out the pronounciation of words in Chinese. It's not at all used in mainland China and hasn't been used in the US for goodness knows how many years. My primary objective in learning it would be so that I can type in traditional Chinese characters in my cell phone and on computers. Unfortunately, you can't type fanti zi using pinyin unless you're using special software. Also, the Tower Records here in Taipei organizes Chinese artists by bopomofo. I was chatting with a Taiwanese person the other day about how they write SMS, and she told me people typically send them in English or using something like wubihua, where you're not typing a transliteration of the sounds, but rather are literally forming the characters stroke by stroke.........

The weather (in Taiwan - Edward) is ridiculously oppresive. I spent a couple of hours yesterday in a McDonald's just because I couldn't bear to leave the air-conditioning. Considering that in terms of restaurants McDonald's is the cheapest place that's air-conditioned and that they don't mind if you hang out there for a little while...........At least it gave me a chance yesterday to work on my bopomofo.............After an hour, I was able to get all the vowel sounds and most of the consonants. For any of you who are interested in the linguistic/phonetic side of Chinese, you'd probably find bopomofo fascinating. For instance, the sound ce is written as a combination of ci and e. If you listen to it carefully, ce does indeed sound like ci and e smushed together. For people familiar with the Roman alphabet, bopomofo is harder to learn than pinyin, but I'm wondering whether it would be more advantageous to learn bopomofo because it would be easier to get the proper pronounciation of the different sounds down.

However, even after getting completely familiar with the actual symbols, it'll still take a little while to get used to typing it in, since the layout of bopomofo on the keyboard makes absolutely no sense. For instance, you'd think that they'd map the symbol for f on the letter f. No, they put the symbol for f on the letter z. The symbol for z is on the letter y (as opposed to the symbol for zh, which is on the number 5). The symbol for y is on the letter m. You get the idea.
Source: Better Tomorrow

European Pension Ages on the Rise

Interesting piece from the Guardian about how the German and Italian governments seem set to raise the retirement age. Obviously I find no fault with this, it is both necessary and inevitable, in fact I imagine it is only the begining. The problem could be a motivational one, and hence a productivity problem. In addition, it is one thing taking a decision at government level, and another implementing the same decision at firm level.

The Italian and German governments risked a public outcry yesterday by proposing that people should work, and make pension contributions, for up to five years longer to help pay for their ever-growing number of pensioners.
The proposals come as countries across Europe struggle to defuse the "demographic timebomb" of falling birthrates and rising life expectancy. The Italian prime minister, Silvio Berlusconi, said Italians should retire at 62, five years later than the average. Under the current system, he said, Italy began each year with a €36bn (£25bn) pension deficit. "In Italy people retire on average at 57. It means unsustainable costs and an annoying loss of talent, which could end up sinking us," he told the rightwing newspaper Libero. He proposed that the retirement age should be gradually raised to 60 by 2010, and after that to 62..............

In Germany a government commission has recommended raising the average retirement age to 67 and increasing pension contributions by 2.5%. It also suggested that no one should be allowed to retire before the age of 64. Italy and Germany are under growing pressure to overhaul their pensions systems in an effort to meet EU budget deficit regulations. Both had more deaths than births in 2002, and their national workforces are unable to pay for the growing numbers of pensioners. Italy has one of the oldest populations in the world, together with Greece and Japan, and one of the lowest birthrates, second only to Spain's. Pensions cost Italy about 15% of its GDP and have been a growing strain on the struggling economy for the past decade. But when Mr Berlusconi last tried to talk Italians into working longer - during his fleeting first government in 1994 - it was met by a million protesters on the streets, and it contributed to the collapse of his coalition government after less than eight months. The German recommendations put further pressure on the government, implying that its attempt to reform the pension scheme in 2001 has been a flop.
Source: The Guardian

Where Have All the Babies Gone?

Whilst I'm down here in Valencia checking-out the progress of the Bulgarian immigrants, Eddie, over in Singapore, keeps up the momentum with another sterling piece about the effects of the 'baby shortage'.

Oh for babies to boost the economy
By Eddie Lee

ITALY is a Catholic country with a long tradition of large families. But last year, despite tax-funded childcare and paid leave for both parents, its fertility rate was just 1.2, half of what it was in the 1980s. In Britain, a study found that one in five women was childless by age 40, with the number of 40-year-old women without children now twice as high as it was 20 years ago. The fertility rate for the United Kingdom is now 1.6. In Scotland, deaths now exceed births. Scotland's population has started to decline.

Fertility rates are defined as the average number of lifetime births per woman. The rate at which a population replaces itself is 2.1. Europe's rate is about 1.5. By 2050, Italy could lose 16 per cent of its population and Germany could have to import half a million immigrants a year to keep the working-age population stable. United Nations population division director Joseph Chamie says what the world is seeing now is a revolution in fertility. Rates are falling in virtually every country in the world. The same factors that have long contributed to declining fertility rates in Europe are now emerging in developing countries.

The world's population could level off at about nine billion by mid-century, from six billion today. A decade ago, the UN was projecting about 12 billion. Singapore has just recorded its lowest number of births in 26 years. Only 18,503 babies were born from January to June, and extrapolating from this figure, there will be about 37,000 babies born this year - lower than the 38,364 recorded in 1977. Indeed, last year Singapore's fertility rate had already dropped to an all-time low of 1.4. Despite baby bonuses and state-supported dating programmes, Singapore has been unable to reverse the drop in its fertility rate, which first fell below the replacement level in 1975.

Dr Cheng Li Chang of the Thomson Fertility Centre said: 'Singaporeans are very realistic people. Raising children is becoming more costly, especially since our education system is so competitive. 'Parents feel the need to spend a lot of money on tuition and enrichment programmes for their children.' This investment in the future, however, also has the consequence that Singaporeans produce fewer children; hence the demographic conundrum. The economic consequences of an impending decline in population are likely to be far reaching. With fewer people of working age and more among the elderly and dependent, an economy's productive capacity and purchasing power are reduced.

In fact, economists David Bloom and Jeffrey Williamson argue in a 1998 paper for the World Bank that East Asia's economic miracle resulted from a simple demographic trend: The working age population grew much faster than the dependent population from 1965 to 1990. This expanded the productive capacity of South Korea, Taiwan, Singapore and Hong Kong. Rapid growth, of course, is not inevitable. But it occurred in these places because they also had the social, economic, and political institutions that allowed them to realise the growth potential created by the demographic transition. Economists call this the 'gift' phase of the demographic transition, from pre-industrial high fertility and mortality to post-industrial low fertility.

It comes first with fewer infants and children dying young, and later, fewer children being born. The result is an increase in the proportion of working adults in the middle phase of the transition. In the final phase, however, the continued decline in fertility results in an ageing population and a decline in the proportion of working adults. This suggests future demographic change will depress growth rates in East Asia. It is no coincidence that Japan is the oldest nation in the world, with a median age of 41.3, and the first postwar industrial economy to suffer from deflation. It is no surprise either that economic growth in Italy, Switzerland and Germany has averaged just 0.5 per cent, with rapidly falling inflation rates, in the past two years. They have a median age of around 40. All three economies are now in recession.

And you can't blame their protracted sluggishness on the bursting of the 1990s stock market bubble, for central banks demonstrated in the 1970s and 1980s that they had pretty much learnt how to mitigate the effects of stock market crashes. Neither are labour market rigidities a good reason. Quite clearly, the deeper underlying cause in all cases is an ageing population. When thinking about the dramatic economic transformation that occurred in East Asia in the past half century, remember also that the plunge from high to low rates of fertility was much sharper in East Asia than in any other region or historical period. Today, the demographic 'gift' is passing from countries such as Japan, Hong Kong, Germany and Switzerland to China, India and Malaysia. Ditto the growth wave.
Source: Straits Times

Is the BBC Fair and Balanced?

In the latest post from unbalanced and unfair blogger Edward Hugh, we could turn our attention to the latest reflection from the BBC concerning the apparent decline in popularity of one George W Bush. Meantime as Bush makes his 'no surrender' speech two more US soldiers lose their lives taking the number of soldiers killed in combat since the official end of hostilities above the number of those who died during the war.

US President George W Bush has said there will be no retreat from Iraq or from the war against terror.
Mr Bush was speaking to US military veterans as the number of American deaths since the end of major combat operations on 1 May surpassed the number killed during the war. The president has seen his popularity rating fall since the war ended, and if Iraq and the Middle East remain unstable, it could affect his chances of re-election. With a sluggish US economy, polls show that many Americans want Mr Bush to concentrate on domestic matters rather than the war on terror. What is the reason for President Bush's falling popularity? Are voters more concerned with foreign policy or domestic issues? If there was an election now, would President Bush win?
The following comments reflect the balance of views we have received:

French Deficit Could Hit 3.9% This Year

France's anticipated budget deficit for this year continues to grow, as do the expectations for next year. This breach of the rules, together with the similar difficulties being experienced in Germany, continues to pile on the pressure in the debate about the eurozone growth and stability pact.

Jean-Pierre Raffarin, the French prime minister, will on Wednesday tell Romano Prodi, president of the European Commission, that France's budget deficit for this year is worse than expected. Internal government estimates, to be made public next month, indicate that it will also exceed eurozone limits in 2004. The disclosure in Wednesday's Les Echos, the French business paper, means that France is set to become the first country of the eurozone to admit it will breach the rules of the stability and growth pact, by exceeding budget limits in three consecutive years.

Mr Raffarin will on Wednesday explain how France's deficit will hit at least 3.7 per cent of gross domestic product in 2003, a notch above the latest estimate of 3.6 per cent announced in June. Government sources now fear a deficit of as much as 3.9 per cent. France's own projections for 2004 will be published on September 24 in the 2004 draft budget. Next year's deficit depends on adjustments on the budgets of the state and the social security but as things stand, it should reach between 3.7 and 3.8 per cent. By failing to rein back its deficit under the stability pact's 3 per cent ceiling in 2004, France risks a penalty, under which it may have to pledge a €4bn deposit. According to the Maastricht Treaty, a country has one year to come back within the 3 per cent limit after it has breached the ceiling.
Source: Financial Times

Chinese Banking Reforms

The process of attempting to 'clean up' China's financial system continues. Where all this will lead only time will show. I am not as pessimistic about this as many of the professional commentators seem to be.

Huaxia Bank, a midsize commercial bank in Beijing, launches a long-awaited domestic IPO Thursday, the latest in what is expected to be a steady stream of listings by Chinese financial institutions over the next year. Huaxia, the fifth bank to list in China, saw its offering subscribed 143 times, according to an official at one of the underwriting firms. The IPO has ignited speculation about an accelerated timetable for partial listings on the mainland of China Construction Bank (CCB), one of China's big four state banks - something that had not been expected before 2006. CCB has established a special office to study a listing and is in the process of restructuring itself to prepare for a flotation. Huaxia will offer 1bn new shares, in addition to its existing 2.5bn shares, at Rmb5.6 per share. If the bank raises the full Rmb5.6bn ($677m) it will be one of the largest IPOs on the domestic market this year. According to analysts, the IPO amounts to a survival strategy for Huaxia, founded in 1992 as the financing arm of Beijing Iron & Steel, one of China's largest steel producers and still the bank's largest shareholder. The funds raised would amount to an effective recapitalisation, as the new money will allow the bank to expand, while meeting international standards for capital adequacy ratios.............

"They will probably go the way we have seen elsewhere in Asia, in which they allow a small free float, followed by a secondary offering of shares," said Terry Chan, of Standard & Poors in Hong Kong. Other options, which could be implemented at the same time, include a cash injection from the central government and further sales of bad debts in return for bonds. However, the issue of the true level of the banks' non-performing loans (NPL) still casts a shadow over any recapitalisation plans. CCB claims that its NPL ratio has fallen to as low as 12.43 per cent, down 3.47 per cent from the beginning of 2003, and well under the official average rate for the big four of about 28 per cent. "We think (the average rate) is much higher," said Mr Chan.
Source: Financial Times

End of US Re-Fi Boom in Sight

Some commentators are claiming that the end of the refinancing boom which has played such an important role in keeping US consumption afloat may now be in sight. From here in Europe it is difficult to reach any firm conclusions on this. Everything depends on how strongly the US recovery goes forward, and how much of a problem the deflation fears become. If, in order to try to build a deflation firewall, the Fed starts to intervene vigorously in the Treasury market to bring down the yield curve, then mortgage rates can come down again, and this can kick off the re-fi cycle one more time. This view that it is over definitely depends on the recovery gathering momentum.

The biggest U.S. refinancing boom ever may be finally coming to an end. With refinancing applications slumping more than 20 percent last week, and nearly 80 percent in just three months from their all-time peak, some economists are declaring the end of the refinancing wave that has buoyed a struggling economy. "You can definitely say the refinancing boom is over," said Drew Matus, economist at Lehman Brothers. On Wednesday, the Mortgage Bankers Association of America said its seasonally adjusted gauge for applications to refinance loans fell 21.3 percent to 2,169 for the week ended Aug. 22. The index has fallen eight weeks in a row and is 78 percent below the record high of 9,977.8 set in the last week of May.

The swift rise in mortgage rates since mid-June from their 45-year lows has closed the doors for homeowners looking to refinance mortgages at lower rates, which would free up cash for them to spend or pay off other debt. "That takes away the financial incentive for many families to refinance," said Frank Nothaft, chief economist at Freddie Mac, the No. 2 U.S. mortgage finance company. Even if rates head lower again, it will probably not be enough to push refinancing back up toward the recent record level, analysts said. "We think rates could drop by the end of the year," said Jay Brinkmann, vice president of research at the Mortgage Bankers Association. "But we are not expecting a big surge in refinancing."

Interest rates, excluding fees, on 30-year fixed-rate mortgages, the home loan held by most Americans, averaged 6.22 percent, unchanged from the prior week but well above the low of 4.99 percent set in the second week of June. The record refinancing boom began in April 2002 just months following the conclusion of the prior refinancing wave during 2001, according to Brinkmann. The financial markets lost faith in a rapid U.S. economic recovery last year even after a series of aggressive rate cuts by the Federal Reserve. Pessimism over the economy forced down U.S. Treasury yields, used to set many U.S. mortgage rates. The combined economic impact of the two refinancing cycles has resulted in roughly $165 billion in spending on home improvements and investments, and helped Americans pay off about $85 billion in more expensive personal debt, according to industry estimates. "It did a good job to help consumers to spend and to clean up their balance sheet," Lehman's Matus said.

Although loan demand for refinancing has fallen sharply in recent weeks, demand for loans to buy homes has dropped only slightly, supported by strong home sales and construction. "Home sales are still quite robust," Nothaft said. In July, sales of new homes dipped 2.9 percent to an annualized pace of 1.165 million annual rate in July from a record high of 1.20 million in June, while sales of existing homes hit a record annual rate of 6.1 million last month. A slight cooling of the housing market and the likely final chapter of the refinancing boom coincide with recent signs that other sectors like manufacturing are starting to turn higher. The Mortgage Bankers Association's index of demand for loans for home purchases slipped to 375.5, down 3.6 percent.
Source: Yahoo News

Tuesday, August 26, 2003

Boskinising Labour Market Data

Writing strongly against the clock - I have to go and interview someone in ten minutes - I'm posting a link sent to me by Mark in connection with the US labour market and my 'another Boskin needed' post. It's a thing called the help wanted index and it's published by the Conference Board:

Help-Wanted Index--Key Job Barometer--Increases Three Points

The Conference Board's Help-Wanted Advertising Index – a key barometer of America's job market – increased three points in June. The Index now stands at 38. It was 47 one year ago. In the last three months, help-wanted advertising declined in six of the nine U.S. regions. Steepest declines occurred in the New England (-12.1%), East South Central (-11.6%) and Middle Atlantic (-9.7%) regions. Increases occurred in the Mountain (10.3%), West North Central (4.2%) and Pacific (3.8%) regions.

Says Conference Board Economist Ken Goldstein: “There are signs that overall economic growth will pick up in the third quarter. The Coincident Economic Index edged higher in June while the Leading Economic Index rose for the third straight month. So the indicators were showing a little more economic growth as early as June, with a suggestion that this trend could continue. However, because want-ad volume was lower in June than in January, hiring is not likely to pick up through the summer months. The Consumer Confidence Index fell in July, reflecting discouragement that despite a year and a half after the recession ended, consumers may face another six months before the labor market turns around.” The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. Because ad volume has proven to be sensitive to labor market conditions, this measure provides an important gauge of change in the local, regional and national supply of jobs.

This index, as far as it goes, seems fair enough. It does what it claims to do: assess the US job market in tems of the relative difficulty of finding work. It seems, trom the last reading that finding a job right now is, as we imagined, tough. But it doesn't tell us the other side of the picture: the job seeking situation. It doesn't tell us what is the real impact of a change from 6.2 to 6.3 or to 6.4% measured unemployment. It doesn't help the problem of having to say: 'many people, as we know, have given up looking for work'. What I would like to see is a more precise measure of just how many people have given up: participation figures can help us with this. I would also like to know what is the back up in the number of people arriving in the labour market. We know this is growing, but this also forms part of the measure of labour market conditions. Are more youg people giving up looking, or more old people? This, maybe, can tell us something about the future productive potential of the economy etc.

BTW: one interesting little detail. The village of Enguera was actualñly the site, in the mid nineteenth century of the first steam engine in Spain. I have just been shown round - by two Bulgarians of course - a most splendid new wine 'cave' (and have come up here replete with the appropriate samples). Everything I have seen was built and introduced in the last twelve months. It seems there is something behind the idea of the importance of tradition in the continuity of innnovative potential. (More on this in a subsequent post, when time permits).

Pension Problems in Singapore

Lots of things been happening here the past few weeks. All ominous signs of worse to come. There was a huge fracas over how many jobs were being taken by foreigners at the expense of Singaporeans. The problem is the government is not transparent with labour statistics in the first place. Now, the biggest idea the government has come up with against the jobless recovery is to reduce the employer’s contribution to the worker’s pension scheme and also to lower the salary ceiling on which the contribution rate is based on. There is also the intention to make the contribution variable - raise it during good times and lower in bad times. Singapore’s pension is a save as you earn scheme. I’ve attached anews article on this:

CPF cuts 'bitter but necessary medicine'

That is the attitude of many people as well as of those in government, says DPM Lee, as he and PM reiterate need for cuts

By Lydia Lim and Tan Tarn How

NO ONE likes to do it but the sooner it is done, the better it will be for Singaporeans.

Prime Minister Goh Chok Tong and Deputy Prime Minister Lee Hsien Loong both made this point last night about the coming revamp of the Central Provident Fund, as they sought to explain why bitter medicine was best taken now rather than later. While clearly concerned about the impact of the changes, Mr Goh urged Singaporeans to face them bravely, saying 'the longer we wait to make the changes, the more serious our jobless situation will become'.

The planned cuts to CPF contribution rates and salary ceilings would save jobs, he told residents at a Marine Parade National Day dinner. This is especially critical for older Singaporeans, a group that needs help because they missed out on a good education and are now being passed over by employers. And he also reminded Singaporeans that they would have to face other adjustments if the country was to remain competitive. 'We must no longer expect lifelong employment in the same company, doing the same job and enjoying annual increments. We have to train and retrain. And we have to keep on increasing our productivity and lowering our costs,' he said.

Mr Lee, speaking at the opening of the Gek Poh Ville Community Club in Jurong West, cited a comment to show many realised there was no choice about the cuts. NTUC deputy secretary-general Matthias Yao told him that a young person from the NTUC had said: 'This whole package...I really don't like it at all but we have to do it.' Mr Lee added: 'I think that sums up the attitude for many of us, including in government. 'We don't like it but we have to do it.'

Like Mr Goh, he also explained the need for the changes, saying the CPF was Singaporeans' most important social safety net as they relied on it to pay for housing, medical fees and retirement. Revealing that the Cabinet had debated the changes many times over more than two months, he added: 'Any change to the CPF will affect almost all Singaporeans. It is, therefore, not something which we will alter lightly.' Although it is a safety net, the CPF is a cost companies have to bear here but not elsewhere. And Singapore wanted to avoid ending up like Europe where, as a result of heavy social security levies, firms try to avoid hiring extra European workers and prefer to expand overseas instead.

The result: Unemployment in Europe stays at around 10 per cent even when the economy does well. Mr Lee reiterated that the changes here 'are vital adjustments to make ourselves more competitive, and to prepare Singapore for the long term'. The Government has been meeting unions and grassroots leaders to explain the need for the changes, he said, and will continue to do after the details are released this week. 'If we don't do it, we will be in trouble. If we do this, it will be another part of getting Singapore competitive again.'

Not Only Worried About the Heat in Europe

Europe isn't the only place where people are worried that things are getting too hot. The Chinese government are woried about the pace of expansion in their domestic economy and the''re trying to apply the brakes a little. This is the kind of heat we'd just love to have here in Europe.

The People's Bank of China decided over the weekend it would mop up funds in the system by raising bank reserve requirements by a percentage point. Days later, it injected funds via the open market in the first such move since January. Analysts said on Tuesday Beijing was putting in place a policy to curtail the rapid growth of funds in the market to prevent economic overheating, while soothing jangled nerves and alleviating a short-term liquidity crunch. "The government is trying to send a signal that they won't squeeze things out. That they want stability, but that they're also concerned about the strong credit growth and the need to cool things down," said Standard Chartered economist Tai Hui. "There was concern there may be a short-term liquidity squeeze, hence the move to put back liquidity. But I wouldn't be surprised if two to four weeks, or two months down the line, they take that back."

The moves over the past few days highlight the tightrope Beijing has to walk as it balances the need to spur economic growth -- vital to create jobs for millions of unemployed -- and the necessity of cooling certain overheating sectors. "China is keen to present itself as taking a more active role in money markets through open market operations, as it tries to balance excess money supply with strong growth," said Bank of America economist Frank Gong. Beijing announced on Saturday a reserve requirement hike for banks and other deposit-taking institutions by one percentage point to seven percent in a bid to cool down sizzling portions of the economy and ease lending risks. Analysts say the hike will drain a whopping 150 billion yuan ($18.1 billion) when it takes hold September 21. The reserve hike prompted fears of a sudden shortage of money on the Shanghai-based interbank market as banks hold back funds to meet the stricter obligations.

The central bank thus followed that up with an announcement on Monday it would buy 60 billion yuan ($7.25 billion) of repurchase agreements and agree to sell them back in seven days. The so-called reverse repo was conducted in tandem with an auction of 10 billion yuan in commercial bills -- effecting a net cash addition of 50 billion yuan. "The injection is meant to calm the markets, and represents a fine-tuning of the monetary environment," said Citigroup economist Yiping Huang. Analysts agreed the reserve hike was necessary to put the brakes on an economy in danger of overheating, especially in red-hot sectors such as auto making and real estate construction. Broad M2 money supply rose 20.7 percent at the end of July from a year earlier, while outstanding loans in the first half of the year grew an annual 23 percent to 15.9 trillion yuan.

"The amount of credit growth we saw in the first half deserves some caution. Twenty-three percent year on year just seems way too high," Hui said. Hence Beijing's move to soak up excess money in the system over the past months, for instance by issuing record amounts of commercial bills to drain the yuan stemming from intervention. Beijing's increase in reserve requirements to mop up excess money -- pumped out as the bank intervenes to keep the yuan steady -- meant it was intent on pursuing a stable yuan policy, analysts say. But economists say China was not keen on letting its yuan appreciate for fear of wrecking its vital export engine. China's economy, which grew an annual 8.2 percent in the first half of the year, is widely expected to grow around eight percent for the whole of 2003.
Source: Forbes

Monday, August 25, 2003

Music is Coming to a Place Near You

Continuing with the changes, I 've decided to put some music choices on my website. This week it's the Italian folksinger Gianmaria Testa, and the CD is called La valse d'un jour. When you open the page you will find the first track the journey, but remember this is definitely music sampling, not downloading. This approach is very much in the spirtit of the Gareth Lloyd analysis of how falling search costs mean more, not less, business for the music industry. I'm just contributing with some peer referenced input.

The internet has made finding good music easier. Online retailers, music reviews, artist websites and so on all help, but perhaps the biggest contributor to falling search costs is the massive uptake of easy to use file sharing software. This gave millions of users access to many songs that they would never otherwise have heard through a simple search and download process, and made it very easy for them to follow up some titbit of information about music they might like. The way that this replaces, to some extent, the purchasing of music is currently a huge concern to record companies. However, many users insist that they buy more albums, not less, since file sharing came along. This is very easy to explain using the framework we've established. Search costs have fallen and consequently, music consumption will rise.

Holidays in Provence

Fresh back from the holidays with the resolution to make some changes. Here's the first. My fotopages fotolog. These are my first set of holiday snaps for those with more time than they have good sense. The Serge in one of the photos is the - now retired - French farmer in whose farmhouse we stay. He's a lovely man - the sort they don't make any more - and as well as his company we enjoy the pleasures of his 'own brand' - no chemicals here - wine, and those small round French Cantaloupe melons that come from his land. Clearly I could have gone to the trouble of putting these on the website. But I am a strong believer in the law of least effort. So maybe with a simple tool like this I will be tempted to post photos more often. Is this a threat or a promise. Be kind to me.

Europe on the Japenese Road Map

Strong article from Anatole Kaletsky this. I wouldn't go along with his tongue in cheek optimism about the UK and the US, but on the danger of what he calls the media cliché of Germany being the prinicipal deflation candidate (I think you will find I was saying this here and on Bonobo Land long before it became fashionable to do so) I think he is bang on target. Also exceptional is his recognition that: "Cutting unemployment pay, reducing job protection and scaling back pensions can accelerate economic growth in an economy where demand is growing. But in an economy suffering from long-term demand stagnation, even the talk of such harsh supply-side reforms is likely to damage consumer confidence and further undermine demand." This is a point - like voices in the wilderness - Eddie Lee and I have been trying to hit home for some time. The srtuctural reforms are necessary, but everything is timing and mix, and if you don't get these right you're more likely to sink Germany further than to do anything constructive. Germany is an ageing and apprehensive society:

Last week's figures confirmed that the German, Italian and Dutch economies have all entered their second or third quarters of economic decline, and that the eurozone as a whole was stagnant for the ninth consecutive month, with most industrial indicators pointing to further weakness ahead. Despite all this grim news, investors are bidding up share prices across Europe, Germany has been the best performing major stock market in the world this year and the euro remains cripplingly expensive against the pound, yen and dollar, not to mention the Chinese renminbi - as anyone who has been on holiday in Europe this year can attest.

This divergence between market behaviour and economic reality can have one of two consequences. Either the eurozone economy will soon start to perform much better than the present statistics are suggesting; or investors in euro assets will soon realise that they are caught up in another asset bubble in some ways even more irrational than the dot-com speculation of the 1990s or the bond bubble that imploded so spectacularly two months ago. There are several reasons why the outlook for Europe today looks considerably worse than it did for Japan in the mid-1990s, when its economy lurched from cyclical recession to structural depression. The first is the paralysis of monetary and fiscal policy as a result of the single currency project. The monetary response to economic stagnation in Europe is proving even more timid than it was in Japan.

The European Central Bank has consistently dragged its feet and aggravated the recession, to the point where investors actually expect an increase in European interest rate next year. Compare this to what happened in Japan after the yen shock of 1995. Japan had already reduced its interest rates to 2 per cent a year before the yen shock hit in early 1995. From that point on the Bank of Japan became much more aggressive, slashing three-month rates to zero in six months (see bottom chart). Does anyone seriously expect the ECB to act so decisively in the next six months? Fiscal policy will provide even less support for the euroland economy. European budgets are already in deficit, and fiscal policy is prevented by the Stability Pact from playing an active stabilising role. Japan managed to avoid a deep depression in the late 1990s because government spending kept the economy afloat, providing a net stimulus of almost 1 per cent of GDP each year between 1995 and 1999.

In euroland, the fiscal stimulus will be nil in the next few years - even on the optimistic assumption that Germany and France continue to ignore the Maastricht treaty's insane strictures to reduce budget deficits when they ought to be expanding. Meanwhile, the euro has become almost as overvalued as the yen was in 1995. In fact export prospects for Europe are now even bleaker than they were for Japan in the 1990s. Japan's net exports grew rapidly from 1996 until 2000, providing the economy with its main source of growth. But Japan was able to increase its trade surplus only because America was allowing its trade deficit to expand. Combining the influences of fiscal policy and trade, we can see that Japan was saved from depression in the late 1990s by a widening of budget deficits and export surpluses, which added more than 1 per cent to GDP growth each year.

Europe now faces exactly the opposite macroeconomic outlook. The budget deficit will be stable at best and may even narrow, if governments are mad enough to follow the instructions of the European Commission and the ECB. At the same time, euroland's current account will shift towards deficit by 1 to 2 per cent of GDP. Thus Europe is carrying a much heavier handicap in the global deflation stakes than Japan did in the 1990s. But what about economic reforms? Surely the Europeans are finally getting the message about deregulating labour markets, cutting taxes, strengthening competition and trimming their welfare states?

There are some grounds for greater optimism in this area, especially in Germany, where Gerhard Schroeder's Agenda 2010 programme is proving surprisingly successful in introducing some modest labour market reforms. But structural reforms, in the absence of a positive monetary and fiscal policy, can be worse than useless. Cutting unemployment pay, reducing job protection and scaling back pensions can accelerate economic growth in an economy where demand is growing. But in an economy suffering from long-term demand stagnation, even the talk of such harsh supply-side reforms is likely to damage consumer confidence and further undermine demand.

This is another of the key lessons from Japan. With an aggressively growth-oriented monetary and fiscal policy (of the kind seen in the US and Britain since the early 1990s) labour market reforms can create new jobs and win public support, but in the absence of a clear commitment from the central bank and the government to keep demand growing, supply-side reforms simply put people on the dole. Yet in Europe, the institutions that created the euro have made the co-ordinated changes in monetary, fiscal and structural policies almost impossible, even if the reform movement starts to command strong political support. This is at the heart of the long-term economic problems faced by the eurozone.

Japan became a laughing stock in the last decade because of the inability of its politicians, bureaucrats and central bankers to agree on the economic reforms that were clearly required. But Japan's challenge in creating consensus is nothing compared with the nightmare of creating co-operation among the warring institutions of the eurozone. The ECB is a far more independent central bank than the BoJ ever could be. The European Commission, even more than the Japanese bureaucracy, is a self-serving institution that pursues its own agenda, regardless of what elected politicians may say.

The eurozone has 12 governments, which between them include roughly 50 coalition parties, as against the single government (more or less) in Japan. This means that Japanese-style problems of fiscal, monetary and political co-ordination must be multiplied by 12 in Europe, or maybe raised to the twelfth power. Investors around the world are betting that Europe is suffering nothing worse a standard cyclical downturn and will soon recover to become the healthiest economy in the world. They could turn out to be right. But remember: that is what everybody thought about Japan in 1995.
Source: The Times

Is 'Speculation' Back?

Barry the Big Picture has been on tv . He also has a useful link to a piece - which also quotes him - in Business 2.0. The point in question: is the current NASDAQ mini-revival a little bit of midsummer madness?

They're back. "It" stocks--the hot issues that defy all the laws of fundamental investing--have reappeared. These are the kinds of stocks that seem to keep heading higher for no other reason than that they finished higher the day before. Search engine Ask Jeeves is up 570% in 2003. Money-losing XM Satellite Radio is up 400%. And unprofitable biotech ImClone Systems (better known for the insider trading scandal that landed founder Sam Waksal in jail) is up 300%. Sure, none are likely to surpass the 2,620% gain of quintessential "it" stock Qualcomm in 1999. But it's beginning to look as though investors are getting caught up in the momentum mania that characterized the final gasps of the bull market.

Just look at these stats: The Nasdaq has gained 29% this year (through July 30) and is up 54% from its Oct. 9, 2002 low. (Standard & Poor's 500-stock index is up about 28% from its low.) According to Thomson/Baseline, 119 companies with a market value of at least $500 million have doubled this year; nearly 40% of them are not expected to post a profit in 2003. And shares of companies (also with a minimum market value of $500 million) that don't pay dividends were up an average of 46% vs. a 16% average gain for those that do. "The companies that have run the most are the ones that have the least [to offer]," says Jeffrey Saut, chief investment strategist for Raymond James. "Speculation is back."LINK

The China Fringe

Two China-related blogs (China-related since neither of them is in fact located inside mainland China) are the Hong Kong based Gweilodiaries and Taiwan Blogger A Better Tommorrow (this latter name comes from the title of a John Woo film). Both are preoccupied right now about the lifestyle consequences of China's re-unification ambitions. Conrad the Gweilo ( apart from sharing my new found interest in posting photos) is non too happy with what he sees as attempts by Zou Zhekai, deputy director of the central government's liaison office in Hong Kong, to gag him and other representatives of the Hong Kong 'media community' in terms of their right to opinion over the future of Taiwan. Zou, it seems, bases himself on a very special interpretation of the notion of 'loyalty' under the currently reigning 'Basic Law'

Zou's statement is stunning in that, to Beijing, 'one country, two systems' appears to mean: (1) reunification with Taiwan, under CCP rule, and (2) that Hong Kongers are required to support Beijing's interpretation. Perhaps Mr. Zou would care to point out where either of those principles appear in the Basic Law. To the extent this humble little blog constitutes part of the Hong Kong media, may I just say Mr Zou, if that's your definition of 'one country, two systems', I most assuredly do not support it. Indeed, I oppose it, support a free and independent Taiwan and independence for Tibet and Uighar as well. I suppose this makes me "not good." Fortunately, absent Beijing's cherished Article 23 legislation, you lack the means to punish me for my insubordination. Is anyone still haboring doubts about the intended use of the proposed subversion and succession laws?

Evidently Conrad is in danger of being accused by the Chinese authorities of being 'fair and balanced'. Better Tommorrow is also preoccupied about the future of Taiwan, and more than a little fascinated by the ROC vice president Anette Lu:

As much as I like someone who speaks their mind, especially when it's unpopular, Lu is either ridiculously naive, frustratingly disingenous, or just outright insane with some of her statements about Taiwanese independence. I would much prefer it if, instead of fire and brimstone, she used sarcasm and irony. Oh man, I'd have a field day if I were vice-president of Taiwan. I'd call press conferences and use finger quotation marks while talking about all the wonderful benefits of reuniting with the motherland.

So BT shares my feeling for irony and sarcasm! But apart from their mutual concern about 'big mother' ambitions, there are also 'little daughter' ones to worry about, and I can't help feeling that both Conrad and Better Tomorrow seem to be unduly interested in the strange phenomenon of Betel Nut Girls. Maybe my problem is age, or maybe it's cultural perspective. This notwithstanding BT makes some interesting comparisons about life in Taiwan and life on the mainland, although my end of the day feeling may be that this tells you as much about being young and having grown up in the 'good-ol' US of A as it does about close cultural detail Taiwan-style.

The main difference between Taipei and the other large cities in the mainland that I've been to is that Taipei just feels so much more organic. For instance, I walked around Ximen for a bit, which is a fancy shopping area with crazy hot girls all over the place and J-pop blaring out of every store. Then I headed south and hit this hardcore Taiwanese nieghborhood with all of these Buddhist temples and Christian churches and night market stalls getting set up and old people walking around, shooting the shit in Taiwanese. You can find lots of bright, shiny areas like Ximen in the mainland (Xinjiekou in Nanjing, Xin Tiandi in Shanghai, Wangfujing in Beijing). But they feel so empty and sterile, like the city government ordered their construction not because there was any demand for luxury shopping (that mall in Beijing at the intersection of Wangfujing and Chang'an jie is probably the worst offender: one empty luxury qipao store after another) as if just by building the stores that they'd become a Tokyo or Milan. The fuwuyuan to customer ratio at these places can be depressingly high. The layout of Taipei, while not the most orderly, feels like it sprung up organically to serve the needs of the residents, as opposed to many mainland cities, which feel like the planners are doing everything in their power to force modernity in and destroy anything of historical value..............

I finally had my first pearl milk tea in Taiwan. It really was off the hizzle, my nizzle. It was smooth and sweet and actually tasted like milk tea. The tapioca balls also were sweet and had a really nice consistency. How could I spend a year in Nanjing, drink dirty dishwater filled with flavorless rubber balls, and claim that I knew anything about zhenzhu naicha? For shame. While I'm in Taiwan, not a day will go by where I go without a cup of sweet, sweet pearl milk tea.