Category Archives: BUSINESS

‘Fragmented authoritarianism’ and state ownership

Author: Paul Hubbard, ANU

Over the past 40 years a truly dynamic private sector has emerged from nothing and now dominates the Chinese ‘world factory’ of manufacturing exports. But while the Third Plenum of the 18th Party Congress in 2013 declared the market to play a ‘decisive role’ in the economy, it also reasserted the ‘dominant position of public ownership‘.

A Chinese national flag flutters at the headquarters of a commercial bank on a financial street near the headquarters of the People’s Bank of China, China’s central bank, in central Beijing, 24 November 2014. (Photo: Reuters/Kim Kyung-Hoon).

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The most visible manifestation of China’s public ownership is its state-owned enterprises (SOEs). At home they dominate key upstream sectors such as energy, resources, telecommunications, and banking. Abroad, they are the vanguard of Chinese overseas direct investment.

But given the oft-reported problems of China’s state sector, is maintaining public ownership consistent with China’s aspiration to become a high-income market economy? To answer this, we must be clear on what meant by ‘state’, ‘ownership’ and ‘enterprise’.

China’s political system is often caricatured as a system of red telephones all ultimately connected to the desk of Chinese Communist Party General Secretary Xi Jinping. But while the general secretary is a powerful man, a more accurate description of China’s political governance is ‘fragmented authoritarianism‘. Power and responsibility are delegated downward to provincial and local levels of government, as well as horizontally between state ministries with different, often …continue reading

    

The impact of trade on employment in the Sustainable Development Goals

The impact of trade on employment in the Sustainable Development Goals

Employment was an afterthought in the Millennium Development Goals (MDGs). It was not part of the original goals but was added in 2008, halfway through the implementation period. It is, however, a key element of the Sustainable Development Goals (SDGs). Goal 8 encourages countries to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” There are eight employment-related targets and ten specific indicators (United Nations 2015).

Trade, on the other hand, is much less central to the SDGs. It is referred to in half a dozen places and its only concentrated reference is in Goal 17, the final one on a global partnership for sustainable development. Within that goal, trade competes for space with other hefty topics including finance, technology, capacity building, and systemic issues.

But trade may have an important role as an “enabler” that supports the achievement of other goals. The specific relationship between trade and other goals is not spelled out in the SDG document. Our recent research has sought to map the relationship between trade and employment to see whether trade can help achieve the employment objectives of the SDGs (Vandenberg 2017).

Gains from trade

Trade encourages economies to specialize in the production of goods and services for which they have a comparative advantage and to import other goods and services that they need. This specialization generates welfare gains for the whole economy. Such gains can support economic growth and thus increase the demand for labor. Therefore, in an indirect manner, increased trade can support the employment quantity aspect of the SDGs.

Trade theory and most empirical studies focus on adjustments that are caused by trade. Some industries and firms expand (i.e., those with comparative advantage) and others decline. Standard trade theory assumed that the movement of labor from one sector to another is …continue reading

    

As Trump era begins, S&P 500 at risk of falling

US stocks fell last week. The S&P 500 lost 0.2 percent for its second consecutive weekly decline.

Reuters cites history in saying that there could be more losses in the coming month.

For financial markets, the Trump era begins on Monday, and if history is any guide the following month should be a rocky one for Wall Street but positive for the dollar.

The S&P 500 has fallen a median 2.7 percent in the month after each new president has taken the keys to the White House since Herbert Hoover did so in January 1929, according to Reuters analysis.

Meanwhile, John Hussman, who has been warning of a weak US stock market ahead, notes even more negative signs in his latest article.

Last week, an unusual set of classifiers that we monitor raised red flags, with two of our three “crash signatures” now suggesting the likelihood of a market loss in excess of -25% in the months ahead (the last time these signatures were active was between April-October 2008). This would potentially represent the opening salvo of a more extended completion to the current market cycle.

…continue reading

    

As Trump era begins, S&P 500 at risk of falling

US stocks fell last week. The S&P 500 lost 0.2 percent for its second consecutive weekly decline.

Reuters cites history in saying that there could be more losses in the coming month.

For financial markets, the Trump era begins on Monday, and if history is any guide the following month should be a rocky one for Wall Street but positive for the dollar.

The S&P 500 has fallen a median 2.7 percent in the month after each new president has taken the keys to the White House since Herbert Hoover did so in January 1929, according to Reuters analysis.

Meanwhile, John Hussman, who has been warning of a weak US stock market ahead, notes even more negative signs in his latest article.

Last week, an unusual set of classifiers that we monitor raised red flags, with two of our three “crash signatures” now suggesting the likelihood of a market loss in excess of -25% in the months ahead (the last time these signatures were active was between April-October 2008). This would potentially represent the opening salvo of a more extended completion to the current market cycle.

…continue reading

    

President Trump and getting on the front foot in Asia

US President Donald Trump salutes participants during the inaugural parade in Washington (Photo: Reuters/ Carlos Barria).

Author: Editors, East Asia Forum

The inauguration of the 45th US President, Donald Trump, is a millennial game-changer and the fallout threatens Asian interests perhaps more than those in any other part of the world.

‘For many decades, we’ve enriched foreign industry at the expense of American industry’, Trump declared in his inaugural speech, ‘[we’ve] subsidised the armies of other countries while allowing for the very sad depletion of our military; we’ve defended other nation’s borders while refusing to defend our own; and spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay’.

‘From this moment on, it’s going to be America First, America First’, Trump hailed. ‘Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength’.

That the United States under Trump would ‘reinforce old alliances and form new ones — and unite the civilized world against radical Islamic terrorism’ might provide a reassurance to allies in Asia and the Pacific, but one that is deeply qualified by the notion that paying for US deployments abroad is under scrutiny.

What is Donald Trump like and what will his presidency really be about?

No one can know for certain: the only predictability about Trump is his unpredictability. But the experts on Trump, those who have studied his life and career and written his biographies, are clear on three things.

‘They see the same person they’ve always seen — the consummate classroom troublemaker; a vain, insecure bully; and an anti-institutional schemer, as adept at ‘gaming the system’ as he is unashamed of that. As they look ahead … to his administration … they …continue reading