mercredi 27 avril 2011
mardi 19 avril 2011
dimanche 10 avril 2011
samedi 9 avril 2011
vendredi 8 avril 2011
vendredi 1 avril 2011
- A sophisticated consumer base: in my post about the risks China faces, I placed particular emphasis on the alarmingly low (30%) share of private consumption in the country's GDP. However, while still worrying, the numbers I used to illustrate my point can be misleading. In truth, the problem is not so much that consumption is atrophied but that investment is on steroids. More importantly, the Chinese consumer is extraordinarily sophisticated, much more than his level of disposable income would suggest. Examples abound to illustrate this phenomenon amongst which the extraordinary speed with which Chinese consumers have integrated the Internet and now mobile networks in their consumption behavior. Chinese consumers are brand sensitive, tech savvy, open to trying out new products and increasingly demanding. Simply selling them tuned down versions of products designed for western markets is no longer enough (it probably never was to begin with). More and more western brands are acknowledging this and are integrating the sophistication of Chinese consumers into their strategies by launching "designed for China" products (notable examples include Hermès and Levi's). Sophisticated consumers are good for the economy since they force local firms to step up their game and stimulate product and process innovation. It also means that once structural obstacles are lifted, the Chinese consumer might well be able to make up for the fall in investment levels.
- Great companies: when western media mention Chinese enterprises, they usually pick state owned giants such as telcos, banks and insurance companies. In my view, these firms have little growth potential beyond Chinese borders and succeed mainly because they operate in ultra-protected markets and benefit from government largesse. But this does not mean that China does not have world class companies. I'm planning on devoting an entire post to the strengths of Chinese companies so I won't give too much away in this paragraph. In short: China has plenty of dynamic firms that have developed innovative products and business processes that answer the specific needs and constraints of emerging market consumers. These companies such as Alibaba, Huawei, Wahaha, Lining and other less well known firms have managed to leverage their cost and scale advantage, capitalize on their first hand knowledge of local environments and exploit market gaps left by large western multinational. They represent the future of China's economy and I'll bet an arm that in a few year's time you will have some of their stuff in your garage/pocket/on your feet.
- Shanzhai and incremental innovation: the word Shanzhai (山寨) literally means "Mountain bandit". It originally referred to counterfeiting but its sense has gradually evolved and it has come to signify the practice of incremental innovation. In short, it means outsmarting richer and better equipped competitors by building cheap but reliable products that still integrate advanced technology and focus on features that truly matter to the customer. The best example is smart phones. For the vast majority of Chinese, smart phones remain too expensive. There is no way the average Li can spend $400 on an iPhone, HTC Desire or Motorola Droid. However that does not mean that the average Li does not want a smart phone and is not willing to spend a sizable chunk of his income on one. Many Chinese companies such as Huawei (mentioned above) and Meizu have smelled opportunities at the low end of the market and have rolled out cheap smart phones that start at around $100. These models such as the M9 and the Ideos are reliable, integrate advanced technologies and take advantage of the open Android platform. What you get is a phone that doesn't look half bad, runs Android and allows you to do pretty much the same thing than the 3 times more expensive HTC Desire. This knack many Chinese firms have for delivering great value at a competitive price will prove a tremendous asset for China's economy.
- A pragmatic leadership: this argument may come as a bit of a surprise but I truly believe that most people in Beijing are aware of the challenges they face and have a generally good idea of what needs to be done to rebalance the economy (even if the process proves to be painful). In my view, the problem lies mainly with local authorities who are the main drivers of credit expansion and investment and who are reluctant to take any meaningful action towards making the Chinese model more sustainable and consumption-driven. But if Beijing manages to nudge local officials in the right direction, I see no reason why China should not be able to pull the rebalancing trick off. There will be some painful re-adjustments but in the end, if everybody sings the same tune (and that tune is the right one) China's should be back in the game pretty quickly.
dimanche 27 mars 2011
jeudi 24 mars 2011
mardi 22 mars 2011
samedi 19 mars 2011
vendredi 18 mars 2011
mardi 15 mars 2011
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs
upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented