Friday, March 20, 2009
Thursday, January 15, 2009
China now third-largest economy
China now third-largest economy
Nipa Piboontanasawat and Kevin Hamlin
Bloomberg
BEIJING — China’s economy overtook Germany’s in 2007 to become the world’s third-largest, underscoring the country’s increasing economic and political clout.
Gross domestic product (GDP) increased 13% from 2006 to 25731-trillion yuan ($3,38-trillion), Germany’s statistics bureau said on its website yesterday. That topped Germany’s € 2,424-trillion ($3,32-trillion), using average exchange rates for 2007.
China’s economy is 70 times bigger than when leader Deng Xiaoping ditched hard-line communist policies for free-market reforms in 1978. After overtaking the UK and France in 2005, China became the third nation to achieve a space walk, hosted the Olympic Games and surpassed Japan as the biggest buyer of US treasuries.
“This number is just one more piece of evidence that China is one of the most important players on the global stage,” said Huang Yiping, chief Asia economist at Citigroup in Hong Kong.
The figure was released as China has its weakest economic expansion since 1990 after exports collapsed on global recession.
German economic growth slumped last year, according to numbers released by the Federal Statistics Office in Frankfurt yesterday.
Louis Kuijs, a senior economist at the World Bank in Beijing, said China’s economy might now be up to 15% larger than Germany’s. He confirmed the calculation that China overtook Germany in 2007.
The US economy is the world’s biggest, followed by Japan’s.
“If China continues to grow at its average rate in the past 20 years and if the US does the same, it will overtake the US in 20 years,” said Tim Condon, head of Asia research at ING Groep in Singapore. “There’s no doubt that will happen. It’s just a matter of time.”
China’s enlarged role in the global financial system was highlighted when it cut rates at the same time as the US Federal Reserve and five other central banks in October to counter the deepening credit crisis. In contrast, Japan stood on the sidelines.
China is the biggest contributor to global growth, underpinning demand for metals, grains and exports of its Asian neighbours. It has a big stake in the US economy, holding $652,9bn in US treasuries, according to US data.
Since introducing free-market policies, the Chinese government has lifted 300-million citizens out of poverty, according to the United Nations. Before the latest revisions, the country’s per-capita gross national income was 132nd in the world at $2360, behind Angola at 125th and Azerbaijan at 126th and ahead of Tonga at 133rd, according to the World Bank.
“China’s GDP tells us something about how quickly it is getting richer compared with other countries, but in terms of per-capita GDP it is still less than 10% as rich as Germany is,” said Kuijs.
Nipa Piboontanasawat and Kevin Hamlin
Bloomberg
BEIJING — China’s economy overtook Germany’s in 2007 to become the world’s third-largest, underscoring the country’s increasing economic and political clout.
Gross domestic product (GDP) increased 13% from 2006 to 25731-trillion yuan ($3,38-trillion), Germany’s statistics bureau said on its website yesterday. That topped Germany’s € 2,424-trillion ($3,32-trillion), using average exchange rates for 2007.
China’s economy is 70 times bigger than when leader Deng Xiaoping ditched hard-line communist policies for free-market reforms in 1978. After overtaking the UK and France in 2005, China became the third nation to achieve a space walk, hosted the Olympic Games and surpassed Japan as the biggest buyer of US treasuries.
“This number is just one more piece of evidence that China is one of the most important players on the global stage,” said Huang Yiping, chief Asia economist at Citigroup in Hong Kong.
The figure was released as China has its weakest economic expansion since 1990 after exports collapsed on global recession.
German economic growth slumped last year, according to numbers released by the Federal Statistics Office in Frankfurt yesterday.
Louis Kuijs, a senior economist at the World Bank in Beijing, said China’s economy might now be up to 15% larger than Germany’s. He confirmed the calculation that China overtook Germany in 2007.
The US economy is the world’s biggest, followed by Japan’s.
“If China continues to grow at its average rate in the past 20 years and if the US does the same, it will overtake the US in 20 years,” said Tim Condon, head of Asia research at ING Groep in Singapore. “There’s no doubt that will happen. It’s just a matter of time.”
China’s enlarged role in the global financial system was highlighted when it cut rates at the same time as the US Federal Reserve and five other central banks in October to counter the deepening credit crisis. In contrast, Japan stood on the sidelines.
China is the biggest contributor to global growth, underpinning demand for metals, grains and exports of its Asian neighbours. It has a big stake in the US economy, holding $652,9bn in US treasuries, according to US data.
Since introducing free-market policies, the Chinese government has lifted 300-million citizens out of poverty, according to the United Nations. Before the latest revisions, the country’s per-capita gross national income was 132nd in the world at $2360, behind Angola at 125th and Azerbaijan at 126th and ahead of Tonga at 133rd, according to the World Bank.
“China’s GDP tells us something about how quickly it is getting richer compared with other countries, but in terms of per-capita GDP it is still less than 10% as rich as Germany is,” said Kuijs.
Wednesday, December 31, 2008
Economics 2008: 10 lessons
Economics 2008: 10 lessons
What a tumultuous year it has been for economics. The 'dismal science' has not seen such a 12-month period before - the year started on a boom and is ending with theories overturned, conventions abandoned and economies worldwide simultaneously falling into recession. Fiona Chan recaps the top 10 economic trends in a year where uncertainty has been the only constant
-- PHOTO: REUTERS
1 Inflation, deflation and stagflation
BEFORE the financial crisis exploded in September, inflation was set to be the year's biggest economic story.
As fuel and food costs skyrocketed, consumer prices soared to record highs around the region, including in Japan, South Korea, Thailand and Indonesia.
In Singapore, inflation hit a 26-year high of 7.5 per cent in April and May, partly due to the rise in the Goods and Services Tax over the previous year. In response, the Monetary Authority of Singapore (MAS) gave the Singapore dollar an immediate boost to help offset more expensive imported goods.
But the spectre of recession was looming ever closer, prompting predictions of the dreaded stagflation: low economic growth coupled with high inflation.
Then the financial crisis arrived, jamming the brakes on consumption in developed nations, export demand and oil prices. Inflation worries transformed into warnings of deflation as asset prices started to plummet.
The MAS reversed its Singdollar position in October, adopting a neutral stance that signalled its change of priorities from targeting inflation to stimulating economic growth. Inflation here is now expected to dive to between 1 and 2 per cent next year, after clocking in at 6.7 per cent in the first 11 months of this year.
But while deflation seems likely in the near term, economists warn of higher inflation in the middle term due to massive government spending and the need to aggressively boost money supply in the face of tighter bank lending. This, in turn, could end up in stagflation if the downturn proves prolonged.
Only one thing is definite: we have not seen the end of the inflation story yet.
2 Oil: What goes up must come down
OIL prices dominated headlines for much of the year, whether they were shooting up to a record US$147 per barrel in July or crashing to below US$34 just two weeks ago.
In the first half of the year, high demand from India and China, combined with rampant speculation, pushed up prices, which peaked at the height of tensions between Iran and the West. Predictions of oil at US$200 a barrel seemed feasible - until the market turmoil in September caused prices to plunge.
Recent moves by the Organisation of Petroleum Exporting Countries to cut supply appear to have had little effect on falling prices, reflecting the extent of uncertainty in the market and the bleak outlook for global growth next year.
Other commodities also had a roller- coaster ride this year.
Gold, however, breached US$1,000 per troy ounce in March and stayed high through the year as risk-averse investors literally poured their money into gilt assets.
3 Nationalisation and bailouts
DECADES of privatisation and lobbying for the liberalisation of markets came to a dramatic end this year as banking titans and giant companies, tottering on the verge of collapse from the unravelling web of bad mortgage loans, went hat in hand to governments for assistance.
Bankers that turned beggars included Wall Street's five hallowed investment banks: Bear Stearns was subsumed by JPMorgan Chase in March, Lehman Brothers collapsed in September, Merrill Lynch sold itself to Bank of America, and Morgan Stanley and Goldman Sachs transformed themselves into traditional bank holding companies.
More buyouts, bailouts and mergers were cobbled together as huge organisations such as insurer AIG, mortgage behemoths Fannie Mae and Freddie Mac and savings and loan company Washington Mutual hovered at the cliff's edge.
After an intense round of political jockeying, the United States unveiled a US$700 billion (S$1 trillion) bailout plan in late September. Britain followed about a week later with a £500 billion (S$1 trillion) bank rescue package, while European nations also acted together to save their banks.
The auto industry is the latest to jump on the bailout bandwagon, sparking an uproar over how much government help is too much. General Motors and Chrysler have obtained more than US$13 billion in US taxpayer funds to stay in business after they warned earlier this month that they would run out of cash in a matter of weeks.
4 Zero interest rates
SINCE October, central banks have been cutting interest rates in a bid to encourage borrowing and spending.
None have been more aggressive than the US Federal Reserve, which has cut its rate by 325 basis points since January. It used up its last interest rate bullet earlier than expected when it slashed rates two weeks ago to between zero and 0.25 per cent, an unprecedented level.
Having exhausted its main ammunition with little effect on the economy, the Fed must now turn to more creative and drastic measures, such as quantitative easing, to spur confidence and jumpstart growth.
5 Quantitative easing
IF YOU had to choose just one economic catchphrase to take into next year, this would be a good one.
This extreme policy of printing money and force feeding it into the system is adopted by governments only after traditional tools have been used up - for instance, when interest rates are already lowered to zero and cannot go further.
The Bank of Japan adopted this measure in the early 2000s during the country's battle with deflation. It flooded banks with money by buying government and commercial securities and avoided a liquidity crunch.
The US Federal Reserve appears to be going down a similar path. It is extending credit to banks through a wide array of facilities, providing them with more liquidity than they need with the aim of increasing money supply.
The Fed hopes this will boost confidence in the banks, encourage lending and economic activity, and even lift inflation, preventing a deflationary spiral.
6 Fiscal stimulus and the revival of Keynes
AS INTEREST rates reach new lows and the outlook worsens, governments around the world have taken a leaf out of the book of famed economist John Maynard Keynes and rolled out aggressive spending plans to keep their economies going as consumers cut back.
The US has taken the lead, with President-elect Barack Obama planning a stimulus package that could reach US$1 trillion. Europe has announced a ¥200 billion (S$411 billion) spending scheme, while China, Japan, South Korea and Canada have also unveiled stimulus plans in recent weeks.
Singapore has offered S$2.3 billion in loan and credit facilities for companies and S$600 million to retrain workers. The Government has also indicated that it will bring back some of the S$4.7 billion construction projects it deferred over the past year.
But the biggest fiscal boost is expected in next month's Budget, where individuals, households and companies are likely to get help to survive the downturn.
7 Decoupling debunked
PERHAPS the biggest economic myth to be demolished this year was the assertion that emerging economies in Asia and Europe had sufficient steam of their own to continue growing even when the US was in a recession.
Until June, economists were still arguing in favour of decoupling, pointing to China's continued strong economic growth as evidence that the region was insulated from Western problems.
But the credit crunch finally put paid to that theory, as the US proved once again that it has the capacity to throw a spanner into the works of the world economy.
The synchronised economic slowdown since then has illustrated how dependent emerging economies still are on export demand, a trend that is unlikely to disappear for as long as trade flourishes.
8 Bank deposit guarantees
SOME economists say the one thing that kept this year's recession from spiralling into the Great Depression 2.0 was the absence of bank runs by the public.
Learning from the lessons of the 1930s, governments moved quickly to shore up confidence in the banking system, with extraordinary measures such as guaranteeing deposits in all banks.
The US Federal Deposit Insurance Corp increased its guarantee of bank deposits to US$250,000.
Many governments, including those in Ireland, Germany, Switzerland, Australia, New Zealand, the United Arab Emirates, Kuwait, Hong Kong and Malaysia, also moved to guarantee deposits.
In Singapore, the MAS set aside S$150 billion in October to guarantee all the bank deposits of individuals and companies here until the end of 2010.
9 Recessions, technical and real
SINGAPORE became the first Asian country to enter a technical recession - its first since the dot.com bust of 2001 - when growth contracted in the third quarter. It followed similar contractions in the second quarter.
Hong Kong, Japan and New Zealand followed swiftly into recession. Outside the region, the US has been in recession for a year while the Eurozone has slipped into the red as well.
A global recession next year is now on the cards, according to the World Bank.
10 Currency volatility
CURRENCY traders had a rough ride this year as the financial meltdown hit 'riskier' commodity currencies and pushed up 'safer' ones.
The Australian dollar lost a third of its value against the US dollar within three months, while fears of a wrenching UK recession pushed the pound down to a new low against the euro earlier this month.
But the US dollar gained despite the American-made crisis, as countries and investors around the world bought into 'safe' US government bonds.
The Japanese yen has also shot up amid waves of global deleveraging.
fiochan@sph.com.sg
What a tumultuous year it has been for economics. The 'dismal science' has not seen such a 12-month period before - the year started on a boom and is ending with theories overturned, conventions abandoned and economies worldwide simultaneously falling into recession. Fiona Chan recaps the top 10 economic trends in a year where uncertainty has been the only constant
-- PHOTO: REUTERS
1 Inflation, deflation and stagflation
BEFORE the financial crisis exploded in September, inflation was set to be the year's biggest economic story.
As fuel and food costs skyrocketed, consumer prices soared to record highs around the region, including in Japan, South Korea, Thailand and Indonesia.
In Singapore, inflation hit a 26-year high of 7.5 per cent in April and May, partly due to the rise in the Goods and Services Tax over the previous year. In response, the Monetary Authority of Singapore (MAS) gave the Singapore dollar an immediate boost to help offset more expensive imported goods.
But the spectre of recession was looming ever closer, prompting predictions of the dreaded stagflation: low economic growth coupled with high inflation.
Then the financial crisis arrived, jamming the brakes on consumption in developed nations, export demand and oil prices. Inflation worries transformed into warnings of deflation as asset prices started to plummet.
The MAS reversed its Singdollar position in October, adopting a neutral stance that signalled its change of priorities from targeting inflation to stimulating economic growth. Inflation here is now expected to dive to between 1 and 2 per cent next year, after clocking in at 6.7 per cent in the first 11 months of this year.
But while deflation seems likely in the near term, economists warn of higher inflation in the middle term due to massive government spending and the need to aggressively boost money supply in the face of tighter bank lending. This, in turn, could end up in stagflation if the downturn proves prolonged.
Only one thing is definite: we have not seen the end of the inflation story yet.
2 Oil: What goes up must come down
OIL prices dominated headlines for much of the year, whether they were shooting up to a record US$147 per barrel in July or crashing to below US$34 just two weeks ago.
In the first half of the year, high demand from India and China, combined with rampant speculation, pushed up prices, which peaked at the height of tensions between Iran and the West. Predictions of oil at US$200 a barrel seemed feasible - until the market turmoil in September caused prices to plunge.
Recent moves by the Organisation of Petroleum Exporting Countries to cut supply appear to have had little effect on falling prices, reflecting the extent of uncertainty in the market and the bleak outlook for global growth next year.
Other commodities also had a roller- coaster ride this year.
Gold, however, breached US$1,000 per troy ounce in March and stayed high through the year as risk-averse investors literally poured their money into gilt assets.
3 Nationalisation and bailouts
DECADES of privatisation and lobbying for the liberalisation of markets came to a dramatic end this year as banking titans and giant companies, tottering on the verge of collapse from the unravelling web of bad mortgage loans, went hat in hand to governments for assistance.
Bankers that turned beggars included Wall Street's five hallowed investment banks: Bear Stearns was subsumed by JPMorgan Chase in March, Lehman Brothers collapsed in September, Merrill Lynch sold itself to Bank of America, and Morgan Stanley and Goldman Sachs transformed themselves into traditional bank holding companies.
More buyouts, bailouts and mergers were cobbled together as huge organisations such as insurer AIG, mortgage behemoths Fannie Mae and Freddie Mac and savings and loan company Washington Mutual hovered at the cliff's edge.
After an intense round of political jockeying, the United States unveiled a US$700 billion (S$1 trillion) bailout plan in late September. Britain followed about a week later with a £500 billion (S$1 trillion) bank rescue package, while European nations also acted together to save their banks.
The auto industry is the latest to jump on the bailout bandwagon, sparking an uproar over how much government help is too much. General Motors and Chrysler have obtained more than US$13 billion in US taxpayer funds to stay in business after they warned earlier this month that they would run out of cash in a matter of weeks.
4 Zero interest rates
SINCE October, central banks have been cutting interest rates in a bid to encourage borrowing and spending.
None have been more aggressive than the US Federal Reserve, which has cut its rate by 325 basis points since January. It used up its last interest rate bullet earlier than expected when it slashed rates two weeks ago to between zero and 0.25 per cent, an unprecedented level.
Having exhausted its main ammunition with little effect on the economy, the Fed must now turn to more creative and drastic measures, such as quantitative easing, to spur confidence and jumpstart growth.
5 Quantitative easing
IF YOU had to choose just one economic catchphrase to take into next year, this would be a good one.
This extreme policy of printing money and force feeding it into the system is adopted by governments only after traditional tools have been used up - for instance, when interest rates are already lowered to zero and cannot go further.
The Bank of Japan adopted this measure in the early 2000s during the country's battle with deflation. It flooded banks with money by buying government and commercial securities and avoided a liquidity crunch.
The US Federal Reserve appears to be going down a similar path. It is extending credit to banks through a wide array of facilities, providing them with more liquidity than they need with the aim of increasing money supply.
The Fed hopes this will boost confidence in the banks, encourage lending and economic activity, and even lift inflation, preventing a deflationary spiral.
6 Fiscal stimulus and the revival of Keynes
AS INTEREST rates reach new lows and the outlook worsens, governments around the world have taken a leaf out of the book of famed economist John Maynard Keynes and rolled out aggressive spending plans to keep their economies going as consumers cut back.
The US has taken the lead, with President-elect Barack Obama planning a stimulus package that could reach US$1 trillion. Europe has announced a ¥200 billion (S$411 billion) spending scheme, while China, Japan, South Korea and Canada have also unveiled stimulus plans in recent weeks.
Singapore has offered S$2.3 billion in loan and credit facilities for companies and S$600 million to retrain workers. The Government has also indicated that it will bring back some of the S$4.7 billion construction projects it deferred over the past year.
But the biggest fiscal boost is expected in next month's Budget, where individuals, households and companies are likely to get help to survive the downturn.
7 Decoupling debunked
PERHAPS the biggest economic myth to be demolished this year was the assertion that emerging economies in Asia and Europe had sufficient steam of their own to continue growing even when the US was in a recession.
Until June, economists were still arguing in favour of decoupling, pointing to China's continued strong economic growth as evidence that the region was insulated from Western problems.
But the credit crunch finally put paid to that theory, as the US proved once again that it has the capacity to throw a spanner into the works of the world economy.
The synchronised economic slowdown since then has illustrated how dependent emerging economies still are on export demand, a trend that is unlikely to disappear for as long as trade flourishes.
8 Bank deposit guarantees
SOME economists say the one thing that kept this year's recession from spiralling into the Great Depression 2.0 was the absence of bank runs by the public.
Learning from the lessons of the 1930s, governments moved quickly to shore up confidence in the banking system, with extraordinary measures such as guaranteeing deposits in all banks.
The US Federal Deposit Insurance Corp increased its guarantee of bank deposits to US$250,000.
Many governments, including those in Ireland, Germany, Switzerland, Australia, New Zealand, the United Arab Emirates, Kuwait, Hong Kong and Malaysia, also moved to guarantee deposits.
In Singapore, the MAS set aside S$150 billion in October to guarantee all the bank deposits of individuals and companies here until the end of 2010.
9 Recessions, technical and real
SINGAPORE became the first Asian country to enter a technical recession - its first since the dot.com bust of 2001 - when growth contracted in the third quarter. It followed similar contractions in the second quarter.
Hong Kong, Japan and New Zealand followed swiftly into recession. Outside the region, the US has been in recession for a year while the Eurozone has slipped into the red as well.
A global recession next year is now on the cards, according to the World Bank.
10 Currency volatility
CURRENCY traders had a rough ride this year as the financial meltdown hit 'riskier' commodity currencies and pushed up 'safer' ones.
The Australian dollar lost a third of its value against the US dollar within three months, while fears of a wrenching UK recession pushed the pound down to a new low against the euro earlier this month.
But the US dollar gained despite the American-made crisis, as countries and investors around the world bought into 'safe' US government bonds.
The Japanese yen has also shot up amid waves of global deleveraging.
fiochan@sph.com.sg
Monday, December 22, 2008
Weathering the financial storm in East Asia
Weathering the financial storm in East Asia
Submitted by James Seward on Tue, 12/16/2008 - 18:10.
"The East Asia and Pacific Region has not been spared the full fury of the economic storm." – East Asia & Pacific Update
The above quote is from the just-released World Bank East Asia Update, and the storm clouds are still gathering over Asia. Growth in East Asian countries was already slowing before the crisis reached a new level of intensity in the middle of September. Governments around the region have made efforts to boost domestic demand through fiscal stimulus programs and monetary policy actions, but the pace of economic expansion is set to weaken further in 2009. GDP growth estimates are now only 5.4 percent for the region in 2009, as compared to 9 percent in 2007. This reflects the significant deceleration in exports in particular, as well as decreased foreign investment and domestic consumption.
Given that the three largest trading partners of developing East Asia (U.S., EU and Japan) have fallen into a recession in 2008, export growth from the region is likely to decelerate further and faster, and countries more dependent on exports will be hit hardest. In fact, the recently released Global Economic Prospects Report found that world trade will decrease for the first time since 1982 and will decline by 2.1 percent in 2009! An example of how the declines in exports is hitting Asia: exports in China, Korea, and Taiwan fell for the first time in seven years (by 2.2 percent, 18 percent, and 23 percent respectively). In addition, industrial output is sliding across the region, with China being the latest to report a severe decline in growth. This worsening of conditions comes on the heels of the recent economic turmoil that hit Asia in late 2007 and early 2008 — the rise in inflation. The earlier turmoil was largely a result of imported inflation (i.e., food and fuel) and domestic factors, such as rapid credit expansion.
The financial systems in emerging Asia now face serious risks from the financial crisis, largely from the impacts on the real sector, in particular exporters and manufacturers, and other key domestic industries including real estate, construction, and infrastructure. Bank customers are under increasing stress and evidence indicates that credit is already drying up in various economic segments, as well as for certain classes of borrowers with particular emphasis on small- and medium-sized enterprises. As discussed in early August on this blog, this may be a sign of a wave of bad debt on the horizon because a number of the financial systems still have weak risk assessment, supervision and transparency among other issues.
Early signs of stress are emerging in the banking systems across emerging Asia. Recent reports issued by ratings agencies indicate that the nominal rise in overdue loans in Chinese banks had edged up by 30 percent in the first six months of 2008 (although the total amount is still relatively small in comparison to total lending). In Korea, the capital adequacy levels of the banks were recently reported to have fallen to the lowest levels in over seven years (but the average level is still above 10 percent). In addition, a small bank failed in Indonesia recently due to liquidity problems and was the first bank in the region to be taken over by a government since the 1997 Asian crisis. Three weeks later, another bank in the region failed – the fourth largest bank in Mongolia. Most recently in Hong Kong, the leading financial center in Asia, banks have been warning on profits for the year. In fact, the second largest bank in Hong Kong, Bank of China, just this week received a $2.5 billion loan from its parent bank in China. This is four times the size of its announced losses so far this year, which as a news report indicated could imply that the bank is preparing for much larger losses next year.
Editor’s note: This is the first of two posts looking at East Asia’s position in the ongoing financial crisis. Part two (click here to read) looks at what governments in the region have done to cope.
Submitted by James Seward on Tue, 12/16/2008 - 18:10.
"The East Asia and Pacific Region has not been spared the full fury of the economic storm." – East Asia & Pacific Update
The above quote is from the just-released World Bank East Asia Update, and the storm clouds are still gathering over Asia. Growth in East Asian countries was already slowing before the crisis reached a new level of intensity in the middle of September. Governments around the region have made efforts to boost domestic demand through fiscal stimulus programs and monetary policy actions, but the pace of economic expansion is set to weaken further in 2009. GDP growth estimates are now only 5.4 percent for the region in 2009, as compared to 9 percent in 2007. This reflects the significant deceleration in exports in particular, as well as decreased foreign investment and domestic consumption.
Given that the three largest trading partners of developing East Asia (U.S., EU and Japan) have fallen into a recession in 2008, export growth from the region is likely to decelerate further and faster, and countries more dependent on exports will be hit hardest. In fact, the recently released Global Economic Prospects Report found that world trade will decrease for the first time since 1982 and will decline by 2.1 percent in 2009! An example of how the declines in exports is hitting Asia: exports in China, Korea, and Taiwan fell for the first time in seven years (by 2.2 percent, 18 percent, and 23 percent respectively). In addition, industrial output is sliding across the region, with China being the latest to report a severe decline in growth. This worsening of conditions comes on the heels of the recent economic turmoil that hit Asia in late 2007 and early 2008 — the rise in inflation. The earlier turmoil was largely a result of imported inflation (i.e., food and fuel) and domestic factors, such as rapid credit expansion.
The financial systems in emerging Asia now face serious risks from the financial crisis, largely from the impacts on the real sector, in particular exporters and manufacturers, and other key domestic industries including real estate, construction, and infrastructure. Bank customers are under increasing stress and evidence indicates that credit is already drying up in various economic segments, as well as for certain classes of borrowers with particular emphasis on small- and medium-sized enterprises. As discussed in early August on this blog, this may be a sign of a wave of bad debt on the horizon because a number of the financial systems still have weak risk assessment, supervision and transparency among other issues.
Early signs of stress are emerging in the banking systems across emerging Asia. Recent reports issued by ratings agencies indicate that the nominal rise in overdue loans in Chinese banks had edged up by 30 percent in the first six months of 2008 (although the total amount is still relatively small in comparison to total lending). In Korea, the capital adequacy levels of the banks were recently reported to have fallen to the lowest levels in over seven years (but the average level is still above 10 percent). In addition, a small bank failed in Indonesia recently due to liquidity problems and was the first bank in the region to be taken over by a government since the 1997 Asian crisis. Three weeks later, another bank in the region failed – the fourth largest bank in Mongolia. Most recently in Hong Kong, the leading financial center in Asia, banks have been warning on profits for the year. In fact, the second largest bank in Hong Kong, Bank of China, just this week received a $2.5 billion loan from its parent bank in China. This is four times the size of its announced losses so far this year, which as a news report indicated could imply that the bank is preparing for much larger losses next year.
Editor’s note: This is the first of two posts looking at East Asia’s position in the ongoing financial crisis. Part two (click here to read) looks at what governments in the region have done to cope.
Saturday, December 20, 2008
Bailout Automotif Amerika Disetujui USD17,4 M
Bailout Automotif Amerika Disetujui USD17,4 M
Sabtu, 20 Desember 2008 - 00:02 wib
TEXT SIZE :
Rani Hardjanti - Okezone
Presiden Amerika George W Bush. (foto: news.yahoo.com)
WASHINGTON - Presiden Amerika Serikat George W Bush telah menyetujui dana talangan atau bailout sektor automotif senilai USD17,4 miliar. Dana ini digunakan untuk menyelamatkan para produsen kendaraan yang tengah megap-megap.
Dengan dana bailout ini, pemerintah Amerika akan menjadi pemegang saham bagi perusahaan yang menerima bantuan. "Kami akan segera melakukan tindakan terhadap produsen automotif Amerika yang kolaps," ujar Bush seperti dikutip dari Associated Press, Sabtu (20/12/2008).
"Jika tidak disetujui, maka akan memperburuk jumlah pengangguran dan pasar saham," ujar Bush. "Dan ini akan menambah ekonomi semakin memburuk," tambah presiden Amerika yang telah demisioner ini.
Di saat yang bersamaan, Menteri Keuangan Amerika Henry Paulson menyatakan, kongres harus menyetuji dana bailout USD350 miliar untuk menyelamatkan sektor keuangan dari krisis keuangan. "Ini merupakan bagian dari dana talangan USD750 miliar," ujar Henry.
Produsen automotif Amerika terancam kebangkrutan terjadi pada General Motors Corp atau Chrysler LLC. Hal ini akan membawa perekonomian Amerika Serikat ke dalam kekacauan. Para ahli industri dan ekonom mengatakan, produsen automotif akan menutup pabriknya, memecat puluhan hingga ribuan pekerja, serta memangkas produksi. Sebelumnya, dana bailout ini sempat ditolak oleh kongres.
"Industri automotif adalah elemen kunci dalam perekonomian," kata Bob Schnorbus, kepala ekonom pada JD Power & Associates di Troy, Michigan. "Segala sesuatu yang mengacaukan akan membuat perekonomian melambat melebihi yang sudah kita lihat," imbuh dia dikutip dari Bloomberg. (rhs)
Sabtu, 20 Desember 2008 - 00:02 wib
TEXT SIZE :
Rani Hardjanti - Okezone
Presiden Amerika George W Bush. (foto: news.yahoo.com)
WASHINGTON - Presiden Amerika Serikat George W Bush telah menyetujui dana talangan atau bailout sektor automotif senilai USD17,4 miliar. Dana ini digunakan untuk menyelamatkan para produsen kendaraan yang tengah megap-megap.
Dengan dana bailout ini, pemerintah Amerika akan menjadi pemegang saham bagi perusahaan yang menerima bantuan. "Kami akan segera melakukan tindakan terhadap produsen automotif Amerika yang kolaps," ujar Bush seperti dikutip dari Associated Press, Sabtu (20/12/2008).
"Jika tidak disetujui, maka akan memperburuk jumlah pengangguran dan pasar saham," ujar Bush. "Dan ini akan menambah ekonomi semakin memburuk," tambah presiden Amerika yang telah demisioner ini.
Di saat yang bersamaan, Menteri Keuangan Amerika Henry Paulson menyatakan, kongres harus menyetuji dana bailout USD350 miliar untuk menyelamatkan sektor keuangan dari krisis keuangan. "Ini merupakan bagian dari dana talangan USD750 miliar," ujar Henry.
Produsen automotif Amerika terancam kebangkrutan terjadi pada General Motors Corp atau Chrysler LLC. Hal ini akan membawa perekonomian Amerika Serikat ke dalam kekacauan. Para ahli industri dan ekonom mengatakan, produsen automotif akan menutup pabriknya, memecat puluhan hingga ribuan pekerja, serta memangkas produksi. Sebelumnya, dana bailout ini sempat ditolak oleh kongres.
"Industri automotif adalah elemen kunci dalam perekonomian," kata Bob Schnorbus, kepala ekonom pada JD Power & Associates di Troy, Michigan. "Segala sesuatu yang mengacaukan akan membuat perekonomian melambat melebihi yang sudah kita lihat," imbuh dia dikutip dari Bloomberg. (rhs)
Wednesday, December 10, 2008
Democrats push $15-B bailout for carmakers
Wednesday, December 10, 2008
Democrats push $15-B bailout for carmakers
WASHINGTON, D.C.: Democrats proposed a $15-billion bailout package for the troubled US auto industry Monday in a compromise that sources say may still not gain approval from the White House.
The proposal offers less than half of the $34 billion General Motors (GM), Chrysler and Ford said they would need to stave off a “catastrophic collapse” of the nation’s automotive industry.
The low-cost, government-backed loans are intended to sustain them through March, which will give President-elect Barack Obama time to address the problem after he takes office on January 20.
“Fifteen billion is the maximum that’s available, given the president’s threat to veto anything else,” said US Representative Barney Frank, one of the lawmakers spearheading talks on the rescue plan.
Officials close to the talks said earlier Monday that the US legislature could authorize the rescue package, which calls for massive restructuring and tough government oversight, by mid-week.
But a senior Bush administration official who requested anonymity said a deal on Monday was unlikely because the White House and the Democrats who control the US Congress were at odds on the issue of the long-term viability of the Big Three US automakers.
US President George W. Bush said that “the definition of viability is open to discussion,” and that “viability means that all aspects of the companies need to be reexamined to make sure that they can survive in the long term.”
“Hopefully we’ll get something done,” he told ABC television in an interview.
“These are important companies, but on the other hand, we just don’t want to put good money after bad.”
White House spokeswoman Dana Perino, who earlier had said a deal was “likely” on Monday, responded to the proposed bill by saying the administration was “reviewing draft legislation we received this afternoon and are continuing our discussions with Congress.”
“We’ll continue to work with members on both sides of the aisle to achieve legislation that protects the good faith investment by taxpayers,” the spokeswoman said.
The proposal calls for a presidential designee, or “car czar” to oversee the restructuring of the Big Three US automakers, distribute the funds and report to Congress on their progress in achieving “long-term viability,” according to a copy of the bill obtain by Agence France-Presse.
Automakers will have to continue to improve the fuel-efficiency of their fleets and also look into using their excess capacity to build bus and rail cars for public transit.
The bill also requires the automakers to sell their private jets and places strict limits on executive compensation.
Senate Majority Leader Harry Reid said the blueprint aimed to “give the automakers the chance to clean house and return to a responsible path toward profitability.”
“The jobs of millions of American workers are at stake, along with the financial security of millions of families. So while we take no satisfaction in loaning taxpayer money to these companies, we know it must be done,” he said.
General Motors, which had warned it could run out of cash as early as January, urged swift passage of the bill and vowed it will “abide by the conditions proposed in the bill and will continue our restructuring with great urgency.”
“We have listened to Congress and have put together a restructuring plan that will deliver a stronger, sustainable GM in a quicker timeframe and without the negative market consequences that could result from bankruptcy,” GM said in a statement.
Chrysler said it was “pleased that progress is being made” and that it looked forward to working with lawmakers and “to completing our restructuring in an orderly fashion.”
Ford, which has said it has enough cash on hand to weather the current downturn but requested a $9-billion line of credit to hedge against worsening conditions or the bankruptcy of one of its competitors, said it would not “not be seeking a short term bridge loan” under the bill.
“But Ford fully supports an effort to address the near-term liquidity issues of GM and Chrysler, as our industry is highly interdependent and a failure of one of our competitors could affect us all,” Ford said in a statement.
Obama has called a collapse of the auto industry “unacceptable,” and said Sunday he wanted a supervisory process that would keep the companies’ “feet to the fire.”
-- AFP
Democrats push $15-B bailout for carmakers
WASHINGTON, D.C.: Democrats proposed a $15-billion bailout package for the troubled US auto industry Monday in a compromise that sources say may still not gain approval from the White House.
The proposal offers less than half of the $34 billion General Motors (GM), Chrysler and Ford said they would need to stave off a “catastrophic collapse” of the nation’s automotive industry.
The low-cost, government-backed loans are intended to sustain them through March, which will give President-elect Barack Obama time to address the problem after he takes office on January 20.
“Fifteen billion is the maximum that’s available, given the president’s threat to veto anything else,” said US Representative Barney Frank, one of the lawmakers spearheading talks on the rescue plan.
Officials close to the talks said earlier Monday that the US legislature could authorize the rescue package, which calls for massive restructuring and tough government oversight, by mid-week.
But a senior Bush administration official who requested anonymity said a deal on Monday was unlikely because the White House and the Democrats who control the US Congress were at odds on the issue of the long-term viability of the Big Three US automakers.
US President George W. Bush said that “the definition of viability is open to discussion,” and that “viability means that all aspects of the companies need to be reexamined to make sure that they can survive in the long term.”
“Hopefully we’ll get something done,” he told ABC television in an interview.
“These are important companies, but on the other hand, we just don’t want to put good money after bad.”
White House spokeswoman Dana Perino, who earlier had said a deal was “likely” on Monday, responded to the proposed bill by saying the administration was “reviewing draft legislation we received this afternoon and are continuing our discussions with Congress.”
“We’ll continue to work with members on both sides of the aisle to achieve legislation that protects the good faith investment by taxpayers,” the spokeswoman said.
The proposal calls for a presidential designee, or “car czar” to oversee the restructuring of the Big Three US automakers, distribute the funds and report to Congress on their progress in achieving “long-term viability,” according to a copy of the bill obtain by Agence France-Presse.
Automakers will have to continue to improve the fuel-efficiency of their fleets and also look into using their excess capacity to build bus and rail cars for public transit.
The bill also requires the automakers to sell their private jets and places strict limits on executive compensation.
Senate Majority Leader Harry Reid said the blueprint aimed to “give the automakers the chance to clean house and return to a responsible path toward profitability.”
“The jobs of millions of American workers are at stake, along with the financial security of millions of families. So while we take no satisfaction in loaning taxpayer money to these companies, we know it must be done,” he said.
General Motors, which had warned it could run out of cash as early as January, urged swift passage of the bill and vowed it will “abide by the conditions proposed in the bill and will continue our restructuring with great urgency.”
“We have listened to Congress and have put together a restructuring plan that will deliver a stronger, sustainable GM in a quicker timeframe and without the negative market consequences that could result from bankruptcy,” GM said in a statement.
Chrysler said it was “pleased that progress is being made” and that it looked forward to working with lawmakers and “to completing our restructuring in an orderly fashion.”
Ford, which has said it has enough cash on hand to weather the current downturn but requested a $9-billion line of credit to hedge against worsening conditions or the bankruptcy of one of its competitors, said it would not “not be seeking a short term bridge loan” under the bill.
“But Ford fully supports an effort to address the near-term liquidity issues of GM and Chrysler, as our industry is highly interdependent and a failure of one of our competitors could affect us all,” Ford said in a statement.
Obama has called a collapse of the auto industry “unacceptable,” and said Sunday he wanted a supervisory process that would keep the companies’ “feet to the fire.”
-- AFP
Tuesday, December 9, 2008
Subscribe to:
Posts (Atom)