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Rising wages and rising production costs for Chinese exports of low tech products like shoes, clothing, toys, clothing, furniture, means a lot of these factories will shut down and move to lower wage countries like Vietnam and India or elsewhere. Elimination of rebates on more than 2000 export items raises cost of manufacturing 14-17% according to Guangzhou based American Chamber of Commerce in South China. And the the tough new labor law enforcing worker rights would increase manufacturing costs by 40% according to the Textile Council of Hong Kong. Additional costs would be incurred to meet tougher environmental controls and anti pollution laws and stricter enforcement. As a result of this Adidas wants its suppliers like Taiwan based Apache Footwear with 18000 employees in Guangdong to move as fast as they can to India where it opened a second factory. This process will unfold over several years till India and Vietnam bercome the new sources of cheaper goods because of the large supply of manufacturing labor for lower value added products, as it will take years to build the logistics and infrastructure for these plants in these countries. But because wages will also rise in India and the laws in India are more likely to be enforced than they were in the atmosphere in China where the Communist led government may have turned a blind eye to enforcement and worker rights in the interests of growth, the export of deflation to the west in the way of cheap Chinese products may be a thing of the past. China is doing this as a planned move it appears. Why? On the surface it makes sense that the heavily polluting factories making lower value added products like shoes, clothing, toys, furniture, would not receive rebates from te state and to improve living conditions and promote consumption at home the government woud pass tough new laws to ensure employee benefits and collective bargaining rights, and employee job security. It also reduces trde tensions at a time when the US economy will be in poor shape and jobs lost become a political issue in the 2008 presidential campaign. But there may bigger pressing concern and urgency in these moves after so many years of this being discussed and this may be that China finally may be at a moment when it is confronted with a sober fact that the US consumer is heavily in debt and may not support China's export growth model much longer and with it China faces a really significant slowdown in its growth rate from 11% to maybe half that if China does not develop its own domestic markets for growth. The old foreign investment model may not work anymore. See the link to Ireland where growth is falling off quickly. Higher wages and longer term jobs with benefits would enable a large middle class to develop from this huge manufacturing worker base especially as China moves to more value added products where even higher wages would be paid. This in turn creates a domestic market over time that would insulate China to some extent from the winds that would be blowing from a US economy suffering from a deep recession that may last several years. This may be evident in the words of the Governor of Guangdong when he says that the government is not abandoning the exporters but that selling domestically is good for the country and good for the people. Something deeper is at work here and one would expect an about turn in policy where instead of workers not receiving back wages and lax enforcement that went on freely in the last decade we would see an effort to build the kind of middle class that would provide the market for Chinese goods that would sustain growth at a more modest but sustainable pace. Which means in the short term all those workers at factories that make toys, shoes, clothing and furniture in provinces like Guangdong would be jobless. Some of these factories may move to provinces in the interior like Sichuan and Hunan provinces which may pickup employment. A report by the American Chamber of Commerce in Shanghai written by Booz Allen says that a fifth of the companies surveyed are considering relocating outside China, and that over half of foreign manufacturers surveyed think that mainland China is losing its competitive advantage to places like Vietnam and India....

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Tsuneo Kita, is the leader of Japan's largest business daily newspaper, the Nikkei. Kita had stated his dream of buying the Financial Times, Britain's largest business newspaper, many years back. He made the best offer of $1.32 billion in cash for the paper to complete the acquisition. Because of ties between the two newspapers and reporting by FT carried in the Nikkei newspaper, FT Group decided to give Nikkei Inc first rights to bid for the paper. The Nikkei is not publicly listed, and a large part of its shares owned by employees. Print still works in Japan and the morning edition has 3 million subscribers. Kita moved to build the digital business early along with efforts at the FT and the Wall Street Journal. A paid website was started in 2010 for the Nikkei and it has 430,000 online subscribers. Kita is a journalist who joined Nikkei Inc. straight out of Keio University in 1971. He was senior editor in New York and Tokyo. Nikkei Inc. was able to make the acquisiton because of its financial strength. It has $830 million in cash on hand and a similiar amount of liquid assets. Profits are modest- 10 billion yen in profit on 301 billion yen revenue in 2014. Kita says he will keep the FT Bureaus intact and not merge them with Nikkei Inc. bureaus. He wants to preserve the editorial independence of the Financial Times, and sees the paper as part of a publishing group covering a broader region of Europe, the U.S. and Asia....

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David Wessel says the U.S. is in a liquidity trap. He says the 500 point drop in the Dow Jones Industrial Averages was a less significant event than the decision by the Bank of New York Mellon to charge clients for keeping large amounts of cash. In a liquidity trap investors are indifferent between keeping their money in cash or in investments providing a return, because interest rates are so low. Today the S&P 500 have in total an estimated $963 billion in cash. The solutions for gettting out of a liquidity trap include government stimulus spending, devaluing the currrency, and generating inflation that could make it easier to reduce government debt. The stimulus approach was adopted in the first 2 years of the Obama administration and there are now increasing pressures to reduce the U.S. deficit. Because of the role of the U.S. dollar as an international currrency and large sovereign holdings of U.S. currency, an outright devaluation of the dollar has not been considered an option. At the same time the weakening of the U.S. currency has helped exports and is encouraged by the Fed and the U.S. government. In a sense all three options are being tried in different degrees and ways. The stimulus was the early response till the deficit concerns began to increase and require attention, the efforts to lower the value of the dollar to increase exports is underway, and the rounds of quantitative easing by the Fed were intended to produce inflation (and avert deflation). All with limited success....

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Matt Miller, a former Clinton aide, says both U.S. parties have failed to do serious problem solving. The reason is that both are looking primarily for election advantage and are not interested in blending the best of liberal and conservative thinking. He even goes so far as to say both parties don't trust the public enough to lay out all the facts openly and explain what action needs to be taken. This is clearly true in one of many examples- the way Clinton advisor Bowles and Republican Senator Simpson took up the job of coming up with a deficit reduction plan looking at things from all angles, and laying out all the facts. Contrast that with the way a Democratic president Obama shied away from openly discussing Bowles-Simpson's closing of most tax expenditures as a key a part of a new action plan. Republican leaders Boehner, Cantor, McConnell, instead of seriously challenging the Democrats to take up the Bowles-Simpson or Rivlin-Domenici proposals, focussed their attention on defunding the government unless certain conditions were met. Serious debates and discussion that should have taken place to arrive at a consensus never took place, eroding the credibility of politicians of both parties, as Miller points out. The failure of leadership brings America back to its roots in community organizing through independent intitiative at all levels for crucial problem-solving discussion. This is the way to arrive at a consensus of what needs to be done for renewing America....

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Charlie Rose talks to Nouriel Roubini about his thoughts on the next bubble and his book- "Crisis Economics." He says financial crises don't just happen out of the blue, they don't happen at random, instead they are predictable. Excessive risk taking and leverage have undesirable outcomes which are predictable as they take shape and get overblown. What happened to all the toxic assets? Banks are still carrying these assets hoping and praying that they don't need to be written down. His view coincides with that of Jeremy Grantham and other experts who see a growing danger in a prolonged period of zero interest rates which encourage risk taking. In all the developed economies of the U.S., Europe and Japan, borrowing can be done at zero interest rates. Investment banks are back to huge profits in proprietary trading using money borrowed at zero interest rates. A new bubble is developing that could burst in 2 or 3 years. The value of most risky assets has gone up by 50-80% in the last year. See Shiller's expert view on the danger from declining confidence levels and from higher uncertainty. Roubini says the Dodd bill is not enough. It does little to addresss the "too big to fail" problem as banks actually became larger after the financial crisis of 2008, and are too big and complex to manage. He also points to the risks of not separating proprietary trading from bank holding activities, and the need for something similiar to Glass-Steagall to separate the two. See Volcker's views on that subject....

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Putin reminds Russians of the precarious nature of all that has been achieved in Russia, as he seeks support from areas outside Moscow. He wrote in an opinion article in February: "Under the flag of democracy, in the 1990's we received not a modern government, but an opaque fight among clans and numerous semifeudal fiefdoms... We received not a new quality of life, but huge social costs; not a just and free society, but the highhandedness of a self-appointed elite, who openly neglected the interests of simple people." Emphasizing the tenuous and uncertain nature of the recent prosperity, Putin said in a televised appearance: "It is enough to take two or three incorrect steps and all that came before could overcome us before we know it." Schwiritz visits the town of Lyubertsy outside Moscow and hears from ordinary people who remember the privation and dark times of the 1990's, who realize that their lives can be much better, but also see the vast improvement in living conditions. There is a real and tangible fear that all this could be lost or eroded. It also shows that as Moscow and St Petersburg have grown and flourished in the last decade with a strong middle class, there is a great deal of uncertainty felt by ordinary people in smaller towns and cities. As for that period in the 1990's, even young activists like Navalny, say a lot was done in the early years of the Putin-Medvedev government, when even Russian mortality rates were falling with a general sense of despair. ...

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Allan Blinder gives a spirited account of what he sees in the Paul Ryan Republican deficit reduction plan. He says that with the voucher plan retirees would fall further and further behind the increasing cost of health insurance. With no explicit cost containment proposals it assumes that some kind of miracle will occur for costs to be kept in check- especially as Republicans want to repeal the cost containment proposals in the President's healthcare plan. He asks whether someone is saying, that we have to destroy Medicare so it can be saved. Ryan woulld also turn Medicaid into a block grant, then underfund it and let the states figure it out when they are in a budget squeeze. Blinder points to the estimates of the Center on Budget and Policy Priorities, that show about two-thirds of Ryan's budget cuts would come from programs that serve low and moderate income Americans. And to make matters worse the steep spending cuts go to finance tax cuts that largely benefit the wealthy. He calls this Robin Hood operating in reverse, and coming on top of 30 plus years of rising inequality. David Stockman makes a similiar point on the editorial pages of the New York Times, April 24, 2011; also adding the point that the middle class will have to pay higher taxes for the deficit to be addressed, something President Obama's plan fails to do. Blinder says that the Bowles-Simpson and Rivlin -Domenici proposals attack the deficit reduction problem in a better way, that asks something from all classes and interests. ...

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Louis Uchitelle talks to Stanley Moses, an economist at Hunter College in New York, and others, to find out if things will work out as expected with the $700 billion or $800 billion that Obama plans to invest in infrastructure, energy, and other things to generate the 3 million jobs and investment. Will this generate private investment like the Interstate Highway program which ocurred during the Eisenhower days and set the economy on fast growth, or will it generate enthusiasm and jobs for a few years, and just as Roosevelt backed off in 1937 to let private investment pick up he found that it was still too weak to make a difference. The point that he hears from some experts like Moses is that the current times are setting up for a deep downturn, so that is not reminscent of the Eisenhower years when the economy was getting on the growth track after the war years. Its not exactly like the Roosevelt years either, because of the many changes that have ocurred in a modern economy, but in terms of the mood, the collapsing investment, consumer spending and credit and the collapsing growth in emerging markets which hits exports, this is a situation that is not easily reversed with a few years of aggressive government spending. Things have to change in the public's mood and in private industry's initiative to invest that would return the economy to a growth pattern, and this may be a long time coming with so much deterioration happening at the same time....

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Corner Office, is a new Sunday Business feature in the NYT. This interview with Greg Brenneman of the turnaround at Continental Airlines, was done by Adam Bryant. Corner Office will cover leadership and Management. This is a wide ranging interview with Brenneman sharing not only his philosophy on work and business, but also his philosophy of life. He describes his approach to a company based on asking what are the two or three most important things you do, levers that you pull, that will make a difference in this company. It should all fit in one page. If its not simple and easy to tell a colleague, then its not right or its too complicated with buzzwords. Another approach is ask what are the 2 or 3 things you don't do which are bleeding the the business. Can you put these things down on a mental page, just one page, just 2 or 3 things that stick out, you absolutely don't want to do. That helps you put down the plan of attack. Brenneman sees too many executives focussed on economic gains and not having a rounded life, a balance that helps them lead happy, productive lives. In his view the balanced person is better at work because he finds fulfillment from all aspects of life. What leaders consider important is a shadow that they cast on the whole organization, in Brenneman's view, making it very important that the leaders actions convey the right message that they care about people....

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Krugman says that this may be the third time that Obama and Geithner are trying to find ways to let the market and banks come up with a value for these toxic assets and take them off the books of the troubled banks. Each time there is he says new bells and whistles but its essentially doing what the Paulson plans were doing, and are a rehash of the Paulson plan. Now in the latest version on March 23 weithner proposed a complicated scheme in which the government would lend money to private investors, who would then use the money to buy the toxic assets. Krugman's view is that it wil not work. The main idea says Krugman behind all these plans is that the toxic assets are worth much more than anyone is willing to pay now because of the lack of confidence and illiquid markets. If this could be changed then they would be assigned amuch higher value and many of the banks would not be in trouble. The trouble with this approach is that with each passing month things are getting worse, a loss of 600,000 jobs a month, and with more foreclosures and higher unemployment, housing prices are probably going to look alot worse a few months from now. Which essentially means that mortgage related securities will remain discounted by alarge number regardlesss of any number of Paulson type or Geithner type plans to wish the contrary. And in the process valuable time is lost. ...

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Suzuki is not going to give up its dominant position in the Indian market easily. It has about 25 years of experience in India and owns 54% of Maruti Udyog which makes about 750,000 cars a year and plans to make 1 million cars in India annually by 2010. In JD Powers surveys Suzuki ranks first then Hond and Hyundai and Toyota fourth. Tata Motors is ninth. Competitiion is sure to heat up and Hyundai also has considerable experience being the second foreign company after Suzuki to come into India earlyon. The newcomers from Euope USA and Japan like Toyota and GM don't have anywhere near the experience and distribution netwrks and years of experience of Suzuki and Hyundai. So Suzuki may lose market share but will continue to be one of the top companies in India for some time. This is made possible by Suzuki investments in India. Suzuki plans a one billion yen research center in India to develop cars for the Indian market and is building a new plant in India.In the nextfew years Suzuki plans to double the number of service centers and showrooms to 1000 to reach every part of India. Suzuki is seeing considerable demand for its Swift car and has higher end versions in the Grand Vitara and the SX4. The head of Suzuki, Mr. Suzuki, has run the company since 1977 and is determined to respond to competition from newcomers with moves of his own to keep Suzuki as one of the leaders in India. ...

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Under the Energy Independence and Security Act of 2007 the government is authorized to give upto $25 billion in low interest loans to auto companiesto retool plants to make smaller fuel efficient cars. Lobbyists for the auto industry are trying to increase that to $50 billion. The package of loans is presented not as a bailout but as a way to offset some of the $100 billion it is estimated it would cost the industry to meet the new fuel economy standards enacted in that bill. GM's 7.2% bonds due 2011 were trading at 64.25 cents on August 27, 2008, translating nto a yield of 29% for that debt. In the credit default market it costs $4.5 million upfront and 0.5 million anually to insure $10 million of GM bonds for 5 years. The govenment loans at 4-5% would cost significantly less as borrowing costs are very high for automakers at present. Both Senators McCain and Obama see Michigan and Ohio as crucial to a win and support the loan package. It would cost $3.75 billion in insurance costs for the $25 billion loan package. Because of the automakers precarious financial condition and no improvement in consumer demand or in financial markets in sight in the next 2-3 years as a plausible scenario, and more losses looming for automakers, this package may turn out to be a crucial element in the recovery of the American auto industry and in turning over almost America's entire fleet of cars on the road into more fuel efficient cars....

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Angola's recent election gives the country a new president Joao Lourenco. Since independence Angola is governed by the MPLA led by Jose Dos Santos. Lourenco was selected by Dos Santos to help Angola navigate a difficult period when oil prices have fallen. Dos Santos remains a key figure in Angola- his daughter heads the oil company that generates 95% of Angola's export revenues, and his son heads the sovereign wealth fund. Lourenco's wife is an executive director of the World Bank, and helped negotiate a loan from the IMF for $1.4 billion in 2009. Lorenco is a low key figure who started by joining the MPLA in the struggle for independence at the age of 20, and is seen as a person Mr. Santos is appointing as he considers retirement.

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The name change from Matsushita to Panasonic will help the company promote its brand in sales overseas especially in the developing countries. Matsushita was founded around 1917 by Konosuke Matsushita to make a device to be used for light bulbs. Matsushita will start making flat panel TV's at a new factory in 2009. Its sales have been sluggish so far hence the need to promote one brand name worldwide similiar to the Sony brand name.

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Gerald Seib of the WSJ points out that after all the belligerent talk diplomacy remains the only best option to reduce the risk of a war with North Korea. He says the U.S. position is weaker with a lack of a clear understanding between the U.S. and its allies. The U.S. and South Korea have differences on trade and on how to address the threat from North Korea.

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Rachel Swarns describes life for Latinos working parttime or working close to the minimum wage in New York City.

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The Lisbon Treaty takes one more inexorable sep in bringing the EU to maturity. The EU needs a public face, and the ongoing EU Council President position instead of a 6 month rotating presidency plus the Foreign Affairs Representative position create this face. In discussions with the USA, China, India, Brazil and other countries the EU then has someone of stature to take up EU interests.

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What a shock to know the city that lost its soul, and is described in Luke Bergmann's "Getting Ghost," with no jobs or hope for black teenagers ,neither in the public schools or in jobs where they can be productive. With the streets ridden with drug dealers and violence. Arab Americans run the small businesses, and what little businesses there were dimmed with the 1967 riots. And yet in the post war period right up to the recent years, Detroit was the center of the automobile industry, with its huge number of jobs in assembly plants and in auto supplier plants. That such two worlds could coexist together side by side, is itself as shocking to an outsider as the earlier story of black people in America. Drop out rates for black male teenagers at 75% before graduating in the Detroit public school system. And unemployment rates for black male teenagers approaching 30-40% in the city according to some reports. And with the situation the way it is, the country enters a period of great economic difficulty with unemployment growing in the Detroit area....