The Economist is pointing out interesting China facts in last week’s leader.
Snippets:
1.on salary levels: “little more than one-twentieth of the average monthly wage in America. But it is 17% more than the year before.”
2. on how the rich world has come to rely on cheap Chinese labour: “by one estimate, trade with China has added $1,000 a year to the pockets of every American household, thanks to cheaper goods in the country’s stores, cheaper inputs for its businesses and stiffer competition in its markets.”
3. on inflation in the past: “..expanding the global workforce by a quarter through the addition of cheap Chinese workers helped keeping the prices down in the west..” My comment: how this has held down inflation and this again contributed to competitiveness should earn more attention
4. on the future: “..higher Chinese wages might start to export inflation.” My comment: productivity increases will probably eliminate that effect and part of the work will go to the next cheap labour market (Joan Robinson“ the misery of being exploited by capitalists is nothing compared to not being exploited at all”)
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5 comments:
2. Agree on flipside - the US borrows extensively (much from China) to finance extensive imports.
3. As to asset inflation I would add Basel 2 classification of mortgage lending as "riskfree" - demanding less capital - driving down margins and then driving up less first class volumes to compensate.
4. No similar size or similarly singleminded country in sight - but decent-sized pockets here and there.
I think Basel 2 gave a strong signal to the entire banking market - mortgage margins will go down as capital requirements go down.
The best way to earn money is to just pass on the stuff instead of carry it on the books - and then by back shares. Others just compensated the lower margins by increasing volumes - driving both margins and asset quality lower.
Stuffees included very much pension funds and even municipalities - looking for better returns when interest levels were driven down by oversupply of credit - driven both by higher gearing in banks and growing accumulation of pension money into their own laps - again leading to oversupply of placing power - leading to oversupply in sovereign debt sector, lower credit quality and lower risk margins all over the place..
Vicious circle to say the least..
More discussion in my Finextra.com blog
Regarding Tradeshift. This has nothing to do with the latest post, but I am curious to hear your thoughts about Tradeshift, the Danish startup. They have citet you in a presentation, why I started reading your blog. "Skype for invoicing" - what do you think - will this result in a industry shift towards cloud computing? How will the banks and large ERP-players respond? Would appreicate your thoughts on this, as mentioned.
Not very convinced as to Tradeshift - how are they going ton earn money?
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