IV. International
(12-01-08)
.
A UN official warned
(11/18) of the dangers of social unrest as export-driven
economies of
Asia start to
slow down in response to fallout from the global
financial crisis. Asian economies have used exports to
fuel their extraordinary growth.
.
There are 900 million Asians living below the World
Bank poverty line, defined as income of less than
$1.25 a day. There are another 300 million who are
literally on the margin. Lower growth translates to
higher unemployment which makes these people very
vulnerable. Real incomes have fallen.
.
The social problems are enormous. In an economic crisis,
children drop out of school, perhaps never to return. If
the child is a girl, that is a potential mother who is
illiterate. And the problem is exacerbated. They need a
safety net to stop the cycle of poverty.
.
Producers of low-cost goods, like Vietnam, compete with
China’s market of home-produced goods. Thailand and
Malaysia carve into
Europe’s
market share of China’s luxury sector.
.
The Chinese are starting
to spend like Americans. Of
China’s
11.4% growth in GNP last
year, the largest segment (4.4% was in consumer
spending). That sector still represents just 38% of
China’s over GDP, roughly half the percentage in more
developed countries, but in the eyes of retailers, that
means more opportunity.
.
Conspicuous consumerism (conspicuous consumption)
is on the rise among Chinese. The trend is driven in
part by competitiveness. If one resident in a community
buys a TV, all residents in the community will update
their TVs. Increasing consumer spending is a key goal of
he $586 billion economic stimulus package.
.
Some Chinese consumers are adopting the biggest vice of
American consumers: debt. Some are
juggling multiple credit cards, consumer loans and
installment plans to buy an ever-increasing number of
cars, washing machines and vacations.
.
Fuan textile factory
became the
first casualty in
China’s
anti-pollution campaign when the multi-million clothing
company was shut down from dumping waste from dyes into
a neighboring river and turning it red. As the economy
went south, it was resurrected with encouragement from
the government, changed its name, and moved to a new
location.
.
China is having cold feet and appears to renege on its
previous pledge to improve its record in environmental
protection. With the expense involved and money hard to
come by from global sources for development of renewable
sources of energy, there is definitely a big problem at
hand.
.
China is home to the world’s most polluted cities. It is
now the largest emitter of greenhouse gases. Its
factories release so much toxic waste to have created
black clouds thousands of miles away. Its waterways are
poisoned with industrial run-off, ranging from arsenic
to acid.
.
Consumer spending in
China
hit $1.3 billion last year. For American companies,
China represents an alternate consumer universe where
the slate is clear and marketers can rewrite the story
of their brands.
.
Wrangler jeans, associated with cowboys and rodeos in
the US, are urban in China. A Wal-Mart opening is a
social event of the year. KFC and Pizza Hut are hot
places for dates. Buicks are young and hip. Nike, which
has 3k retail stores in 300 Chinese cities, is expanding
into smaller cities. Tiffany, which has a total of 8
stores on the mainland, hopes to open 4 or 5 a year.
Coach, the upscale handbag brand, plans to add 50 shops
in 5 years.
.
“A lot of American customers have a complete wardrobe of
jewelry, panel doors from previous generations. That’s
not the case in China. Chinese consumers are at this
early stage of acquiring a sense of style and
appreciation for design in jewelry.” (James Quinn,
Global President of Tiffany)
.
Wal-Mart has 215 stores
in China
and is expanding aggressively into smaller markets.
During the first 9 months of this year, net sales in its
international division were up 16.5%, compared with the
same period last year, while in the US they were up only
7.1%.
.
In the US, most locations are big box stores in the
suburbs or rural areas, but Wal-Mart’s in China are
almost exclusively in downtown areas. The food aisles
are filled with everything from squid and duck necks to
kimchi-flavored potato chips. The Chinese like brand
names. They heard of Wal-Mart; now they want to see what
it’s like.
.
KFC has a declining consumer base in the US. Now it has
more than 2,300 restaurants in China and hopes to
increase it to 20k in the long term. A KFC opens every
day in China while Pizza Hut is the #1 casual dining
restaurant. They serve 7 types of coffee, 6 types of tea
and half-dozen other drinks, including waxberry juice.
Sweets include a dozen varieties of cakes. (Ariana Cha,
WP)
.
The global economic
crisis can bring down the Chinese government. The
Pearl River Delta, a manufacturing hub in
S. China
whirs with sound of commerce. Alongside massive new
highways, clusters of factories churn out toys,
electronics and other consumer products for the world.
In cities like Guangzhou, the “new rich”
businesspeople cut deals at swank hotels.
.
As the economic crisis hit western consumers’ wallets,
order for the Delta’s products have slowed down and
dried up. Angry factory workers, many owed back pay,
have taken to the streets. In one recent incident, some
300 suppliers and creditors descended on the River
Dragon complex, where the owners vanished, and looted
warehouses to salvage something.
.
In the US, the economic implosion just puts another dent
on Pres. Bush’s reputation. In China, it could mean the
breakdown of the entire political order, regardless of
the $586 billion stimulus package. The people tolerated
Beijing’s authoritarian hold on them as long as they
were doing well financially. That is not true anymore.
The government has come to the end of the line as far as
delivering continued economic growth.
.
Exports constitute nearly 40% of China’s GDP (vs. 10% of
GDP in US in most years). Some 10k factories in S. China
closed down by summer of 2008 and 20k are expected to
follow by end of the year. Unemployment is skyrocketing
in Wenzhou, one of the main exporting cities, where
about 20% of workers have lost their jobs.
.
Homosexuality is illegal
in India.
The Indian penal code describes the act as “against the
order of nature,” and declares it punishable by 10 years
to life in prison, longer than most rape or murder
sentences.
. The effort
to repeal the law is seen as a test to India’s
commitment to secular democracy, with some legal experts
saying that moral or religious arguments cannot trump
constitutional rights in a democratic society. A verdict
is expected before the end of the year.
.
Studies show they often lead dangerous closeted lives,
with high rates of suicide and mental illness. Lesbians
have reported bring fired from their jobs and raped for
not being feminine enough. Most gay Indians are married,
often with children and have covert relationships, with
lovers, activists said.
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Even though India legalized inter-caste marriages 50
years ago, newlyweds are still threatened by violence,
most often from their families. Killings of inter-caste
couples have increased. The caste system still
represents the highest barrier to social mobility.
. Pakistanis
were hit by soaring food and energy prices earlier in
the year and the country’s financial problems have
multiplied since late summer. Islamabad’s currency
reserves have nearly evaporated, forcing a new foreign
loan or risk defaulting on the country’s debt.
.
The rupee, its national currency, has been
devalued, and inflation is squeezing Pakistan’s poor and
middle-class alike. A prolonged economic crisis could
trigger a period of widespread unrest that could
strengthen the hand of extremists and threaten its
democratically-elected government, with grave
consequences for the regime.
.
As bad as economic conditions are in the US and Europe,
where outright recessions are expected next year, they
are worse in developing countries such as Pakistan which
was already struggling with violent insurgencies and
widespread poverty.
.
A bomb killed 8 mourners at the funeral of a slain
Shiite cleric in NW Pakistan. It also injured 28 people
and was followed by riots.
