LyrArc Article Gist
Spain's Repsol accepts $5 billion in a settlement with Argentina for its stake in YPF nationalized by the government. Argentina will pay Repsol dollar denominated bonds with market value of at least $4.67 billion. Repsol can sell the debt at any time.

LyrArc Article Gist
UN programs to reduce food storage losses in Pakistan by using metal storage containers instead of jute bags and mud silos protect grain from insects, rats and water. This has cut losses in storage of grains by upto 70%.

LyrArc Article Gist
The city where the auto industry in the USA started in the 1920's and what it is today and its future a century later as we approach the 2020 mark. The industry in decline and reshaping itself as a global industry with sales in Asia and Europe and the rest of the world a new focus as the US market begins to decine in significance relative to the rest of the world both in terms of sales and opportunities for expansion. The poverty rate the highest in the nation at 28.5% and the highest foreclosure rate in the nation after Stockton, California, with one in 33 homes in Wayne County in foreclosure. And things are only going to get worse in 2008 and 2009 because auto sales are expected to decline and the Alt A mortgages are expected to see a bump up in the interest rates.

LyrArc Article Gist
Bill Marriott tells Adam Bryant about an encounter with Eisenhower at his father's family farm in Virginia in 1954. Eisenhower asked the young Bill about whether his dad, Eisenhower and the Secretary of Agriculture should go outdoors hunting quail on a stormy wintry morning- "What do you think we should do?"

LyrArc Article Gist
Simon Nixon points to two large capital gaps Spain's government faces for Bankia. Spain was not prepared for the events of the last month as it took control of Bankia. The agreement to convert 4.5 billion of preference shares into equity gives it 100% of Bankia parent, Banco Financiero y de Ahorros, and 45% of Bankia. The capital gaps Spain faces for Bankia comes from expected loan losses which it has been slow to deal with. BFA-Bankia's real estate loan losses are estimated at 52 billion euros. Capital provisions for this are only 11%. J.P. Morgan estimates another 4.9 billion euros will be needed under new government rules. But these rules do not reflect all the losses if real estate loans are written off and and other loans are correctly shown as nonperforming, and other corporate loan provisions are increased. When this is done total losses would in reality be about 12% of the 190 billion euro loans at BFA-Bankia or 22.8 billion euros, according to experts. To correctly deal with this would require $15 billion euros, in addition to the 4.9 billion euros, for a total of 19.9 billion euros. The other capital gap comes from BFA's capital carried on books at 12 billion euros, the pre-IPO value. This has been shrinking rapidly to 5.5 billion euros at 2011 end, and is now down to 2.8 billion euros. This could mean another capital gap of 5 billion euros, depending on to whether shareholders are wiped out. Bankia has 350,000 private shareholders and it will be important to maintain depositor confidence. The total is close to 25 billion euros in capital gap for BFA-Bankia that the Spanish government must face up to quickly. It does not stop there because there are other cajas savings banks and other banks that will have to be taken into account- too large a loss would mean losing market confidence and poorer access to financial markets. ...

LyrArc Article Gist
Efforts to cut costs by new Lufthansa CEO Carsten Spohr have led to pilot strikes in Dec. 2014, with flight cancellations and 160 million euros of lost earnings in 2014. Intense competition and high operating costs are leading to this determined effort to bring costs down. Lufthansa and other major airlines such as Air France have seen the market change with about 40% of the intra European travel market having gone to Ryanair, EasyJet and other low cost carriers. Lufthansa's profit has declined to 300 million euros in 2013 from 1.2 billion in 2012, giving urgency to CEO Spohr's effort to remain competitive. For 2012 and 2013 Lufthansa cut costs by about 1 billion euros, and the target is for another 500 billion euros in savings for 2014. Most of this was done by job reduction of 3500 jobs, and by shifting low cost flights outside the Munich and Frankfurt hubs to a separate lowcost carrier, Eurowings, based in Dusseldorf. This has echoes of the strategy pursued by Air France for Transavia low cost carrier, leading to strikes by the pilots unions and flight cancellations. The Eurowings carrier will use a different pay structure with about 30-35 percent lower pay and benefits than the main Lufthansa carrier, done by separate agreements with pilots, maintenance and cabin crews unions. Critics say the focus on a separate low cost carrier is not the right strategy as it would remain a small part of Lufthansa group. Spohr, a company executive with 20 years in various Lufthansa positions says this is only part of a larger strategy and other changes to make Lufthansa competitive. Just as at Air France, pilots unions of Lufthansa see this as a step towards reducing in future the pay structure at the main airline operations. Labor costs are about a fifth of 30 billion euros in annual revenues at Lufthansa in 2013, with 118,000 employees worldwide....

LyrArc Article Gist
The advanced technology on the Noble Bully 1 oil drilling rig in deep waters 140 miles south of New Orleans. It is jointly owned by Shell and Noble Corp. The technological improvements on the rig could only have been imagined a few years ago. A Eiffel tower shaped structure is completely enclosed in the rig compared to open derrick structures used on earlier rigs. The technology includes GPS, wind sensors, motion sensors, hydraulic systems, computer controlled thruster propellers on the bottom of the vessel to drill wells with precision. It can operate in water 8250 feet deep to 12,000 feet with safety upgrades, and upto 40,000 feet. A similiar ship Noble Bully 2 operates on the coastal part of Brazil. A new platform called Olympus will be a tension leg platform floaing on the sea like a cork, held together by tying it to the ocean floor using cables. The project is called the Mars B development. New sensors use seismic technology with devices closer to the ocean floor in the Gulf picking up data. The data is sent to Shell scientists working onshore and produces four dimensional maps of oil reservoirs using computer chips. The cost savings for the smaller structure include less steel and less fuel used, zero toxic emissions, and operating with 160 workers- 40% less workers than previous rig designs. Veteran drillers say its a lot better working environment and lot safer. Chief drillers sit in "drill chairs" and adjust the speed and direction of drill pipes using joy sticks and computer screens. It is this kind of technology that countries like Mexico, Brazil, Argentina and India need to develop their off shore oil fields, creaing new opportunities for oil companies such as Chevron, Shell, BP, Exxon and Total. The new technology equiped drilling ships, platforms and LNG processing ships are a way for Shell to reduce costs and improve capital efficiency, the new focus for CEO Van Beurden in 2014-2015....

LyrArc Article Gist
Consumer Reports is published by nonprofit advocacy group with 640 employees. It is based in Yonkers, New York, and was founded in 1936. It takes no advertising and answers only to buyers of the magazine and to consumers. Its labs based in Yonkers test a whole range of products and Consumer Reports does not hesitate to put a "Don't Buy" rating on products. In June it pointed out the defect in the Apple iphone that made it lose reception when the left corner was touched by a user. It tested the Lexus 460 a few months ago, and when it found that it was a rollover risk, Consumer Reports gave it a "Don't Buy: Safety Risk" rating. The magazine has come up with new contraptions that test different products. In the 50's it created a smoking machine that accumulated what was left of a smoker's inhalations in a container device. And it was credited by the Surgeon General's Report in 1964 warning of the dangers of smoking, as having done some of the serious research on the subject of smoking dangers. The magazine suffered a loss in 2001 of $9.4 million, but has since recovered under the leadership of Guest, who had earlier served as chairman. Guest moved the testing to more expensive products like Lexus cars and made another important decision. He expanded testing so that when it came to laptops, cell phones and flat screen TV's (which were becoming rapidly popular in the market), the testing would be ongoing. Guest moved announcements and postings of new product results to the internet and online subscriptions have tripled in the last 7 years. As a result the company has been profitable since 2003. Other decisions have been to add user opinions and comments, buying Consumerist.com which puts up reader opinions, and to attract younger readers. And though initially feared by scientists at Consumer Reports, who preferred to avoid user opinions and stick with the scientific facts, the moves have not affected its credibility. About 7 million subscribers subscribe to Consumer Reports, and about half of these subscribers pay $26 a year for access to its website, ConsumerReports.org. This makes it one of the handful of information publications that have paid digital subscribers, including the Wall Street Journal Online, which has only a fraction of the subscribers of Consumer Reports....

LyrArc Article Gist
Hitachi's conversion to a leaner, more profit conscious company, learning from rivals, GE, Siemens, IBM and large Korean companies. CEO, Nakanishi, graduated from Stanford with a computer science degree in 1979, during a break from Hitachi. He takes a hands on approach to management and brings this approach to tough assignments to learn what is going wrong. He moved to San Jose, to figure out why the hard disk drive business Hitachi bought from IBM for $2.05 billion was losing money. There he found quality problems were causing 60% of the hard drives coming off the production line with defects. After fixing the problems and achieving 10% profit margins Nakanishi put the company up for sale. Western Digital bought the company for $4.8 billion. His hands on approach includes meeting directly with public officials and ministers in governments around the world that buy its nuclear plants, high speed trains and large machinery. To maintain its preferred bidder status Nakanishi met with Britain's transport minister during the switch in government to the Conservative party in 2010. In his approach he is part of a new breed of Japanese executives, some with education in the U.S., such as Toyota's new CEO, Akio Toyoda, and others such as Toshiba's CEO, Norio Sasaki, who are eager to break away from the mold. Like Toshiba, Hitachi has shifted away from its consumer product lines. Hitachi consumer products are expected to make up only 10% of sales in the coming fiscal year. Emphasis is on the industrial products from nuclear plants to power plant equipment and high speed trains that powered Hitachi from its early beginnings as a maker of mining equipment in the 1920's. These executives are vigilant about a "Not Invented Here Syndrome" typical of large Japanese companies. Nakanishi says there is a lot Japanese companies can learn from rivals about cost and strategies. The experience came with hard knocks. In March 2009, Hitachi announced the biggest loss for a Japanese company upto that time of $9.9 billion. As head of the power and industrial business Nakanishi lost a contract to build a power plant in the Unted Arab Emirates to Korean companies. Compared to Hitachi, Toshiba's strategy is to emphasize industrial products such as nuclear reactors but also keep a presence in consumer products because Sasaki's view is that consumer products require smaller investments and generate cash flow. Jurio Osawa, WSJ, April 9, 2012, Toshiba's Chief Takes Stock....

LyrArc Article Gist
Malaysia's debt to GDP ratio increased to 242% in mid-2012 from 192% in 2008 according to McKinsey. As export growth has slowed the Malaysian government is relying on credit expansion to consumers and large capital projects such as the planned subway project in Kuala Lumpur to sustain growth. Similiar credit expansion is seen in other Asian countries- Thailand, Vietnam, Singapore, Hong Kong. The period 2008 to 2013 has seen a rapid acceleration in credit expansion in these countries and especially in China. China's debt to GDP ratio increased to 183% in mid 2012 from 153% in 2008, according to McKinsey. Nomura Holding's economist Zhiwei Zhang, and other economists say it is above 200% when government data on "shadow banking" lending institutions such as trust companies is included. IMF economist Giovanni Dell'Ariccia has studied of debt expansion and credit booms since the 1970's. He and other economists at the IMF have found that credit booms- the rapid increase in credit to GDP ratios- end up in crises one third of the time, result in below par growth in another third of the time, and only in one third of the time does growth continue at the high pace. Alex Frangos talks to government officials in Kuala Lumpur who do not take seriously the high vacancy rate for office buildings in the capital of about 20% even as new office towers are being built. Bob Davis gives the example of government owned Hunan Expressway company in China which has a huge road building program and doubled its 2009 debt levels. Another state owned company in shipping China Cosco Holdings increased total debt from 85 billion yuan in 2009 to 123 billion yuan in 2012. As export growth slowed in China in 2009 credit expansion is driving growth. The normal restraints of the market are absent in China's state owned companies. Charlene Chu, senior director of Fitch Ratings Inc in Beijing, says 2012 demonstrated that the Chinese government cannot slow credit growth without risking a decline in growth. China's GDP growth in the 1st quarter of 2013 slowed to 7.7% from 7.9% in the 4th quarter of 2012. This poses a serious problem for China. China has never experienced the kinds of problems seen in Asia after the 1997 banking crisis, in the eurozone today, and in the U.S. following the financial crisis of 2008, making government officials prone to complacency about the risks....

LyrArc Article Gist
The U.S. Justice Department files a civil lawsuit accusing S&P and parent company McGraw Hill of giving improper ratings to poor mortgage investments which allowed them to inflate in value, creating the conditions for a crash in these investments when the crisis happened in 2008. The penalty sought by the Justice Department and the attorney generals for 16 states is $5 billion to cover losses to investors such as state pension funds and federally insured banks and credit unions. The civil suit comes 5 years after the onset of the financial crisis of 2008, which created the greatest financial crisis since the 1930's. Negotiations for a settlement were conducted by the Justice Department with McGraw Hill for an extended period of time. The talks broke down in January 2013. In these negotiations the Justice Department sought a penalty of over $1 billion and S&P's acceptance of wrongdoing. S&P countered with a proposed settlement of $100 million. The government pushed for admission of guilt on at least one count of fraud. It is not known why the Justice Department filed this lawsuit 5 years after the crisis when the public's memory of the ratings issue is beginning to fade. Is it because the preparation of the case required this much time, the action not taken because it would be seen as punitive in 2011 when S&P downgraded the U.S. sovereign credit rating, the fragility of the economy in 2011, because of the approaching election in 2012, or some other reason. One of the reasons why it was important to take corrective action early was to preserve the integrity and credibility of financial markets, so critical for public confidence. An additional reason was to secure from credit ratings companies the internal reforms and change in leadership and culture that would prevent recurrence and damage to the economy. An example of this change is the change in leadership and culture underway at Barclays bank in Britain after the investigation into the manipulation of the London Interbank Offered Rate or LIBOR. The Justice Department action in this respect is an advance from the policy at the S.E.C., which has not insisted that companies involved in the crisis admit wrongdoing, setting up the process for changes in leadership and culture such as the one at Barclays....

LyrArc Article Gist
Several experts point to a dangerous change in the nature of unemployment in this downturn. Heidi Shierholz of the Economic Policy Institute, says people are more likely to get stuck with unemployment now than at any time in the post war period. Andrew Stettner, deputy Director of the National Employment Law Project, says a larger share of the unemployed are not going to be able to go to the same line of work. They will need new skills, just like an auto worker in a permanently downsized industry would have to find new skills to make a product in the renewable energy field or health care. And the law as it currently stands does not help either. Because if an unmeployed worker looks for training or goes back to school he loses his unemployment benefits, something the Obama administration proposes to change. What this means is that many of the unemployed will end up as permanent job losers. Rob Valetta, an economist at the San Francisco Federal Reserve Bank says that throughout the the last 3 decades including good times, the unemployment pool is shifting towards permanent job losers. Lawrence Katz, a Harvard University economist, points out that once workers exhaust their unemployment benefits and don't get new training, they become disconnected to the labor market, and bascially end up on disability or become permanently unemployed. The statistics bear this out. In April 2009, 47.1% of the people collecting state unemployment insurance exhausted the usual 26 weeks of benefits without finding work, according to the Bureau of Laor Statistics, that is the highest rate on record. In December 2007, there were about 2 unemployed workers for every job opening, according to Labor Department data. In March 2009 there were five unemployed workers for every opening. Mark Beaupre, 49, of Providence, R.I. lost his $8 an hour manufacturing job an year ago, one of many manufacturing jobs he has held since the 1980's. His wife Cathy lost her customer service job a year ago. This couple who together made $50,000 a year, are now behind on their mortgage payments and have applied for food assistance. At a recent job fair in Providence he says three thousand people turned up and he could not even get into the parking lot. ...

LyrArc Article Gist
Laffer says that starting in September 2008, the Bernanke Fed has radically increased the monetary base, comprised of currency in circulation, member bank reserves held at the Fed, and vault cash, by almost $1 trillion. See graph. The percent increase in the monetary base is the largest increase in the last 50 years by a factor of 10, he says, and its outside of anything we have ever experienced. The currency in circulation component which previously comprised 95% of the monetary base, has risen by a little less than 10% while bank reserves have increased 20 fold. With such large reserves banks are lending more money. The 12 month growth rate of M1 is now in the 15% range. But he sees reduced demand for money as confidence is restored in the banking system. He sees the drop in output and manufacturing and employment leading to further reduction in the demand for money. His view is that the reduced demand for money, and the rapid growth in the money supply, will lead to higher interest rates and inflation, unlike anything experienced in th 1970's. The backdrop to this is the huge liabilities taken on by the federal government in the auto and banking bailouts, and through the stimulus and other programs, with a deficit he projects at 13% of GDP. Steps the Fed could take such as issuing $1 trillion in new bonds to contract the monetary base, become difficult, considering that the Treasury plans issuance of $2 trillion in new bonds in the next 12 months. The alternative is to increase the reserve requirements of banks to restrain the growth in the money supply. A too rapid contraction of the money supply would cause the economy to go back into a recession. See Paul Krugman in the NYT, June 15, 2009, who cautions against reversing course. Krugman says the Fed increased reserve requirements in 1937, leading to putting the economy back into a slump. Krugman responds to Laffer by saying that the economy faces deflationary trends, and is in a liquidity trap where policymakers cannot cut interest rates further, making inflation less of a threat at this time. Krugman says overcrowding of private investment is not happening, as government is only stepping in where private investors have retreated....

LyrArc Article Gist
Now in March 2008 it appears that defaults on construction loans by smaller regional and local banks to single family home builders is spreading across the nation to the point where it may bring the credit squeeze for home, auto and credit card loans to local communities in smaller towns across America. This will be further slowdown not just housing but consumption at the local Walmart and retail stores. Loans to single family home builders went down from a peak about 2 years ago of $350 billion to about $250 billion in 2007. now the delinquencies on these loans is 8% in the 4th quarter 2007 according to Foresight Analytics. Its much higher at 14% in states like Ohio and Michigan. The Atlanta afffiliate of National Home Builders Association says that 20% of these builders are late in payments in that area. In states like Florida, Arizona and Arkansas, and Minnesota the delinquencies is at 10%. Note that the highly reputed ones like the Levitt and Sons that built Levittown in the post war period are also taking bankruptcy as banks are calling in their loans to be paid in full when they see builders losing money. What first appeared as signs of trouble in the Cleveland area is now spreading across the nation. Mr Whitlatch who studied planning at the University of Pennsylvania and went into building homes in the Clevelad area since 1969 is one of the home builders who is declaring bankruptcy after 9 million dollars in debt and using up $2 million of his own money and now selling off his family home. Fannie Mae and Freddie Mac have been authorized by the Bush Administration to put $200 billion into the mortgage market to keep things from getting worse in the housing market but much of the damage is already underway. How else will this affect local economies the local banks will be in trouble. Analysts estimate that about 150 local smaller and regional banks will go under in the next 3 years. Compared to this about 900 local banks went under in the S&L crisis over 5 years. It will put new stress on the local communities and their economy in coming months and years as the economic crisis goes from big cities to smaller towns and communities throughout America. ...

LyrArc Article Gist
For years Peter Bernstein has watched the US markets, from the postwar recession of 1958 till today. He is now 89 years old. He sees 2 culprits one is oversecuritization and the second is years of overborrowing by financial institutions and consumers alike. He rules out a V shaped business cycle. he sees an L shaped business cycle or a a flat U. It would be a flat U because it will take a long time for the memory to recover from the excesses of recent years and the consequences. He remembers the early years after World War II, it took a very long time to get the depression out of business and banking decisions. And he says one of the things that helped people take risks was the feeling that the central bank had got things right and knew what it was doing but he says the Fed too now is going to feel what it should do now is less clear. So the feeling going forward will be to be very careful. He thinks this will take a long time to clear up, much longer than people think. Not 2009, he is sure they are wrong, there has to be a respite along the way is how he puts it. He says until credit is going up instead of down you can't have growth. And he thinks housing has to be a part of this. And then there is the uncertainty. What if, what if China goes into a recession? His point that " nothing can go in one direction forever." And China has been growing like this for twenty years since the 1990's. It just does'nt go on forever. and there has to be a respite. Again here him speak: first he goes to housing, he says somehow housing has to flatten out. Then he shifts to say "we have to underpin the consumer" and with that he shifts to saying this is why its different, and to saying this is why its like nothing we have had before. And then he turns to investment, saying its investment that made the V at the bottom of the cycle but he doesn't see the consumer in the USA coming up with a positive till he has worked out the excesses of overspending. Exports or consumer overseas? He thinks they maybe too infected by us to do it. Though Asian growth will help....

LyrArc Article Gist
The director of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, Cai Fang predicts that by 2009 there would be a widespread shortage of workers, pushing up industrial wages. Figures from the UN Population Division show that China's working age population will decline in the years ahead. There are two things here that matter. The millions of people in a socalled surplus labor force that can be tapped so that industry can hire more people expand and grow without wage inflation, and second the working age population 20-29, younger people being preferred by employers for the long hours, single people who can stay in dorms and can be mobile to move near factories and do not have the restrictions of married people with children. The one child policy has limited the growth of the working age population. After rising by 1.3% a year according to the UN Population Division during the decade to 2005, the population of working age is expected to increase at an annual rate of 0.7% until 2015, and then shrink by 0.1% ayear until 2025. The surplus labor pool figures estimates vary from 150 million people to 200 million people, but the Economist estimates the true figure to be much smaller because government figures for the rural labor force include millios of migrants already in the cities and others working in rural industry not farming. The population of workers in ages 20-29 fell from 233 million in 1990 to 165 million in 2005. Because of this shrinking of supply of eligible labor especially considering the preference of textile and electronics firms to hire young women because they complain less and put up with long hours and for single men preferred by construction firms, Cai Fang believes that this preferred or eligible labor pool is shrinking to the point where it will be a problem in the years ahead. This will have the impact of shrinking the growth rate to around 7% sometime after 2009. Problems that remained under cover because of the Olympics will also become evident as 2008 winds down. Some experts argue that there are other factors that will contine to sustain the pool of available workers, but its this pool of preferred available workers that will be in short supply according to Cai Fang. ...

LyrArc Article Gist
Chinese leaders at annual policy meeting turn to issues facing nation's 730 millon farmers, as urban outcomes year after year far outpace growth of rural incomes. See graph. Urban incomes have shot up just as rural incomes remain sluggish as the country has focused on rapid industrialization, rapid urbanization and an export driven manufacturing economy for two decades with some success because of the focused effort. But this focused effort is dependent on the ability of Western Europe and the USA as well as other countries sucking in cheaper Chinese manufactured goods. This ability of the western countries to absorb Chinese manufactured goods at an astonishing rate is now called into question, and maybe permanently impaired after years of out of control consumption and spending and easy credit with the impact of the credit and housing crisis. As one of the aspects of this focused effort was to make enough rapid progress in industry and urbanization that it could stay ahead of the problems facing the rural areas and farmers, the new situation in western countries and China's lowered growth rate with lower exports, calls for new thinking on how to address the problems facing the rural areas and farmers. Part of the problem is that farmers do not own land in China. The government owns all the land and China's farmers only have 30 year leases on the land and technically that land cannot be sold though it can be transferred. A related aspect to this is that farms though having 50% more productivity than in 1980 are still small by western standards and it takes a lot of land to feed the growing needs of a more affluent urban population. The typical Chinese farm is 1.5 acres compared to 15 acres in Hungary and Poland and 432 acres in the USA. Obviously the US farms are huge and China does not have the vast acreages of land compared to the people, but larger farms would enable the kind of improvements posible on larger farms to raise productivity. Ways have to be found to increase farmers incomes and to enable farmers to move to urban areas which means creating more jobs. This will have to be done in the context of a domestic led growth and trade with other Asian countries as the export drive and export industries shipping products to western countries see their growth fall. ...

LyrArc Article Gist
Property sales are estimated to fall by 28-33% in China, twice as earlier forecast by S&P Global Ratings. This is a steep decline that will affect the Chinese economy so dependent on construction. This week there were reports of property buyers in 100 cities getting together to withhold payments on unfinished apartments. Property developers depend on these payments as they have severe liquidity problems and need cash for operations.

LyrArc Article Gist
There may be psychological hurdles in China's growth with the effects on mental health from lockdowns in major cities, the revolt in the property sector with home buyers losing confidence in developers, the loss of confidence of foreign investors from US and EU. The dependence on the property sector to carry so large a burden of growth for the last 2 decades in China may now look like an error. The dependence on foreign investment may also be an error as the loss of confidence could mean some withdrawal and a lack of sustained investment.  It could even be said that restraints on both sectors property and foreign investors could have created alternative paths to growth, and reduced the shift of factories from the US and Europe to China that have now caused trade friction and and a reverse shift of investment back to home countries of US and EU. Trade friction has it appears backfired in a way that extends to the overall relationship which could have been prevented by preventing the hyper growth that happened. Greg Ip of the WSJ has argued that compared to Japan's growth in the sixties and seventies from a country of 100 million the hyper growth for a country of 1 billion for 2 decades created a massive impact on communities in US and EU that were dependent on factories that were lost to China. This has alienated large sectors of the public in the US and EU which could have been prevented by restraints on hyper growth in China. Ip says the growth was too large and too fast for the US to cope. It may have permanently damaged the relations between the two countries showing that trade and globalization had unintended effects when left to business and governments staying away from keeping an eye on how it was happening. ...

LyrArc Article Gist
This report in WSJ says China's government faces severely strained government finances. Local government entities sale of land financed 40% of local government revenues in China, and most of these have dried up with the very real loss of confidence in property sector. Government now faces $900 billion in shortfall in revenues says this report. There may be psychological hurdles in China's growth with the effects on mental health from lockdowns in major cities, the revolt in the property sector with home buyers losing confidence in developers, the loss of confidence of foreign investors from US and EU. The dependence on the property sector to carry so large a burden of growth for the last 2 decades in China may now look like an error. The dependence on foreign investment may also be an error as the loss of confidence could mean some withdrawal and a lack of sustained investment.  It could even be said that restraints on both sectors property and foreign investors could have created alternative paths to growth, and reduced the shift of factories from the US and Europe to China that have now caused trade friction and and a reverse shift of investment back to home countries of US and EU. Trade friction has it appears backfired in a way that extends to the overall relationship which could have been prevented by preventing the hyper growth that happened. Greg Ip of the WSJ has argued that compared to Japan's growth in the sixties and seventies from a country of 100 million the hyper growth for a country of 1 billion for 2 decades created a massive impact on communities in US and EU that were dependent on factories that were lost to China. This has alienated large sectors of the public in the US and EU which could have been prevented by restraints on hyper growth in China. Ip says the growth was too large and too fast for the US to cope. It may have permanently damaged the relations between the two countries showing that trade and globalization had unintended effects when left to business which has no comprehension of how the macro developments can affect the relations between the peoples if the other effects in the relationship such as community impacts are ignored which business says is not its role,  and governments staying away from keeping an eye on how it was happening and adjusting for ill effects with restraint and redirection of business policies. ...

LyrArc Article Gist
China's manufacturing sector contracts in June with the PMI index dropping below 50 - to 49.0.  Exports were also coming in lower. Experts say the increase in interest rates by the US is reducing imports of Chinese goods into the US. This comes as local governments are strained in their finances by $900 billion, and a budding revolt is taking place from property buyers with developers in financial trouble, as reported in the WSJ. Psychological hurdles now loom in the loss of confidence in the public in the property sector, loss of confidence of foreign investors with many constraints in operating, mental health issues for the population in many cities with the covid lockdowns.   The growth has slowed to 0.4% and there is now a realization dawning that there was overdependence both on property sector and foreign investment that set up new factories offshored from the US and Europe that alienated the public in these countries. Unlike wih the situation of Japan in the sixties and seventies for modernizing its economy growth of the scale China was pushed into by misguided and self interested  business interests in the US including its investment banks and local government officials in China without restraint by the central government in Beijing, ultimately led to trade friction and permanent damage to US China friendly relations. Communities in the US and the EU simply could not cope with the hyper growth from hyper shift of factories from the home countries to China that pushed this hyper growth. The property sector played the same role in the domestic front with too big a burden carried by it resulting in hyper growth. This did not have to happen. It happened because of a lack of understanding that this would have consequences in the longer run which is now showing up. ...