The Yen-USD exchange rate was fixed at 360 from 1949 to 1971. In 1972, the Yen appreciated to 308. In 1973, the Yen was floated and from that time to mid-1985, it drifted with a downward bias (stronger Yen) to around 250 per USD. Then, it began a steep slide that saw the Yen touched 85 to a dollar in mid-1995. It recovered to about 140 in mid-1998 and then fluctuated between 100 and 135 for nearly a decade. From mid-2007, the Yen started its downward slide from about 122 to the present rate of about 77. Such is the strength of the Yen.
So, why is the Yen so strong? Well, it is because the Yen is a currency with net inflows. Japan exports more than it imports. This gives it a positive trade cash flow. The other component of the inflow is the investment cash flow. Huge Chinese purchase of Japanese debt has helped this account. The Chinese, in their effort to diversify their foreign reserve, bought 1.7 trillion of Yen in the first half of 2010. This is despite the Yen having the world’s lowest interest rate of 0.1 %.
Sentiment is also helped by the perception among market players that the US Federal Reserve may be more willing to conduct aggressive monetary easing than the Bank of Japan. Additionally, the repatriation of funds by Japanese investors has also helped the Yen. Domestic economic condition of deflation is making the Yen’s purchasing power rise thus rendering it a great store of value.
So, how are the Japanese companies coping with the strong Yen? It is reported that for every Yen rise against the dollar, Toyota’s operating income is slashed by 34 billion Yen. Many companies are shifting their production abroad – to countries where the taxes are lower, labour is cheaper and where the markets are growing. Also, Japanese companies have gone on an acquisition spree. The number of deals done has increased by 30% in the first 8 months of this year. In value terms, the acquisitions have more than doubled to $46.7 billion.
Tuesday, October 18, 2011
Friday, August 12, 2011
The AAA club
Standard & Poor’s downgraded the sovereign rating of the US from AAA to AA+ on 5 August 2011. The main reasons cited for the action were the $14.2 trillion debt, about 100 % of the GDP and the high fiscal deficit. This caused a huge turmoil in the financial markets the following week.
So the US is out of the AAA club. Who are the other members of this club? S & P has 13 nations on its list. There are Australia, Austria, Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Singapore, Sweden, Switzerland and United Kingdom. Who is the odd one out? It has to be Singapore – a non Caucasian nation and the only one from Asia.
How is it possible that Singapore - a small nation, is in the club? Well, firstly, Singapore’s GDP per capita of US$56,521 is one of the highest among the club members. Secondly, Singapore’s 3 banks, OCBC, DBS and UOB are among the top six strongest banks in the world. In fact, OCBC came out top. It also has a foreign reserve of $250 billion.
Singapore has the highest millionaire density in the world. 11.4 % of its households are in the millionaire category. It is projected that by 2015, Singapore will have the world's highest per capita wealth - $4.5 million. For comparison, Switzerland, the highest per capita wealth now, has a value of $4.2 million.
So the US is out of the AAA club. Who are the other members of this club? S & P has 13 nations on its list. There are Australia, Austria, Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Singapore, Sweden, Switzerland and United Kingdom. Who is the odd one out? It has to be Singapore – a non Caucasian nation and the only one from Asia.
How is it possible that Singapore - a small nation, is in the club? Well, firstly, Singapore’s GDP per capita of US$56,521 is one of the highest among the club members. Secondly, Singapore’s 3 banks, OCBC, DBS and UOB are among the top six strongest banks in the world. In fact, OCBC came out top. It also has a foreign reserve of $250 billion.
Singapore has the highest millionaire density in the world. 11.4 % of its households are in the millionaire category. It is projected that by 2015, Singapore will have the world's highest per capita wealth - $4.5 million. For comparison, Switzerland, the highest per capita wealth now, has a value of $4.2 million.
Wednesday, June 29, 2011
The Hong kong Dollar
The Hong Kong dollar was pegged to the Sterling post WWII for economic reasons. It was later switched to the US dollar. Pegging a developing country’s currency to that of its largest trading partner has distinct advantages. You lock in your labour cost advantage which happens to be your greatest development asset. The negative aspect is that you lose control of your domestic monetary policy.
In the mid-Seventies, the US started a cycle of huge monetary stimulus that spawned a high inflationary spiral years later. The medicine used to combat inflation was high interest rate. This resulted in a deep recession for the early Eighties. Hong Kong made a wise decision to unpeg from the USD in 1974. It avoided the malaise that inflicted the US.
In October 1983, Hong Kong repegged its dollar to the USD. This time, it was for political reasons. Hong Kong was to be handed back to the mainland in 1997. Hongkongers were considering moving their wealth out of HKD or the place itself. So, the HK administration decided to repeg to avert such a crisis. The peg of HKD 7.80 to 1 USD has survived with minor modification, till now.
In the last one year, the USD has depreciated against the Yuan. It went from 6.83 Yuan to 1 USD to 6.47. This represents a 5.3 % appreciation of the Yuan or by corollary a 5 % depreciation of the HKD. During this same period, the SGD has moved up against the USD from 1.4 to 1.25. This is a 10.7 % improvement. So, the HKD, vis-à-vis the SGD has depreciated 10.7 % in the last one year. Does Hong Kong need this devaluation to stay competitive?
Already, many Hong Kong residents are converting their savings to the Yuan. Yuan deposits in Hong Kong now total some Y400 billion. This is expected to hit Y2 trillion by the end of 2012. Exposure to property is seen as a way of being long the Chinese currency over time. That is why the property market in Hong Kong is booming. Inflation in Hong Kong is aggravated by the lost of purchasing power of its currency.
Should Hong Kong remove the peg or peg its currency to other currencies? Its basic law requires it to peg to a freely convertible currency. Renminbi is out because it still has capital controls and does not trade freely. There is increasing support to peg to a basket of currencies like Singapore does. The Yuan can be a component of the basket and does not contradict the basic law.
Pundits think that the adoption of the basket will be done soon. When that happens, the HKD is expected to appreciate. So, keep an eye out for this.
In the mid-Seventies, the US started a cycle of huge monetary stimulus that spawned a high inflationary spiral years later. The medicine used to combat inflation was high interest rate. This resulted in a deep recession for the early Eighties. Hong Kong made a wise decision to unpeg from the USD in 1974. It avoided the malaise that inflicted the US.
In October 1983, Hong Kong repegged its dollar to the USD. This time, it was for political reasons. Hong Kong was to be handed back to the mainland in 1997. Hongkongers were considering moving their wealth out of HKD or the place itself. So, the HK administration decided to repeg to avert such a crisis. The peg of HKD 7.80 to 1 USD has survived with minor modification, till now.
In the last one year, the USD has depreciated against the Yuan. It went from 6.83 Yuan to 1 USD to 6.47. This represents a 5.3 % appreciation of the Yuan or by corollary a 5 % depreciation of the HKD. During this same period, the SGD has moved up against the USD from 1.4 to 1.25. This is a 10.7 % improvement. So, the HKD, vis-à-vis the SGD has depreciated 10.7 % in the last one year. Does Hong Kong need this devaluation to stay competitive?
Already, many Hong Kong residents are converting their savings to the Yuan. Yuan deposits in Hong Kong now total some Y400 billion. This is expected to hit Y2 trillion by the end of 2012. Exposure to property is seen as a way of being long the Chinese currency over time. That is why the property market in Hong Kong is booming. Inflation in Hong Kong is aggravated by the lost of purchasing power of its currency.
Should Hong Kong remove the peg or peg its currency to other currencies? Its basic law requires it to peg to a freely convertible currency. Renminbi is out because it still has capital controls and does not trade freely. There is increasing support to peg to a basket of currencies like Singapore does. The Yuan can be a component of the basket and does not contradict the basic law.
Pundits think that the adoption of the basket will be done soon. When that happens, the HKD is expected to appreciate. So, keep an eye out for this.
Monday, June 6, 2011
Whither the Euro?
Will the Euro survive? It all depends on how things pan out in Greece. First, it depends on whether Greece will resolve to push through austerity measures to reduce its budget deficits. Or, are the richer members of the Eurozone (23 nations) willing to support the weakest. Then, Greece could default on its debts. The last option would be for Greece to leave the Euro.
Greece has a debt to GDP ratio of 140%. Its total debt is E340 billion. Its unemployment rate is at a record 15%. It is contemplating selling state-owned enterprises to raise money to pare down the debt. The assets under consideration are its telephone company, post office and ports. These sales could potentially raise E50 billion. Asset sales are an attractive way of cleaning up the public balance-sheet without doing anything that further chokes demand.
On May 20th, Fitch cut Greece’s debt rating by another three notches. Greek ten-year bonds are now giving a yield of 16.8 %. At this rate, Greece cannot afford to borrow anew from the market. (Greece needs funds to redeem its maturing bonds.) So, it will have to depend on the stronger partners for handouts. But the stronger members like Germany and France will face revolt at home if public fund is used to bail out other nations. As such, this is unlikely to happen.
So is default inevitable? A default by Greece would make investors shun Greek debt and make it hard for the country to borrow. A more palatable option would be for the creditors to grant an extension on the maturity of their bonds i.e. roll over their bonds when they fall due. That would keep Greece away from the market for a while. Also, it would give Greece a reduction of 20 to 25% on the present value of their debt. That is tantamount to the creditors taking a haircut on their Greek debt.
What about Greece leaving the Eurozone? Leaving would allow it to inflate its economy, devalue its currency and maintain competitiveness. However, the disadvantages are that it would expand its debt burden, provoke capital flight, cause turmoil across Europe’s banks and endanger its membership of the EU. That would bring more misery to its people. It would be on its own. So, Greece would probably not leave the Euro and the Euro would probably survive.
Greece has a debt to GDP ratio of 140%. Its total debt is E340 billion. Its unemployment rate is at a record 15%. It is contemplating selling state-owned enterprises to raise money to pare down the debt. The assets under consideration are its telephone company, post office and ports. These sales could potentially raise E50 billion. Asset sales are an attractive way of cleaning up the public balance-sheet without doing anything that further chokes demand.
On May 20th, Fitch cut Greece’s debt rating by another three notches. Greek ten-year bonds are now giving a yield of 16.8 %. At this rate, Greece cannot afford to borrow anew from the market. (Greece needs funds to redeem its maturing bonds.) So, it will have to depend on the stronger partners for handouts. But the stronger members like Germany and France will face revolt at home if public fund is used to bail out other nations. As such, this is unlikely to happen.
So is default inevitable? A default by Greece would make investors shun Greek debt and make it hard for the country to borrow. A more palatable option would be for the creditors to grant an extension on the maturity of their bonds i.e. roll over their bonds when they fall due. That would keep Greece away from the market for a while. Also, it would give Greece a reduction of 20 to 25% on the present value of their debt. That is tantamount to the creditors taking a haircut on their Greek debt.
What about Greece leaving the Eurozone? Leaving would allow it to inflate its economy, devalue its currency and maintain competitiveness. However, the disadvantages are that it would expand its debt burden, provoke capital flight, cause turmoil across Europe’s banks and endanger its membership of the EU. That would bring more misery to its people. It would be on its own. So, Greece would probably not leave the Euro and the Euro would probably survive.
Wednesday, May 18, 2011
The Big Brain Drain
Malaysia has a huge brain drain problem. The country’s human capital is haemorrhaging. A conservative estimate puts the number of Malaysians working outside the country as 1 million in 2010. This diaspora is large and expanding. One out of every five Malaysian with tertiary education has emigrated. The country aims to be a high income nation. But human capital is the bedrock of a high income economy. So, the irony is that Malaysia needs talent, but talent seems to be leaving.
Why is there such a big outflow of skilled people? There are two main reasons for this: the push and pull factors. On the domestic front, the push factors are corruption, social inequality, lack of religious freedom and educational opportunities and the government’s affirmative action policies. Outside, the pull factors are better career opportunities, better compensation and a better quality of life.
Singapore is the chief beneficiary of this brain drain. The island nation takes in about 57 of the total diaspora. Of this, 90% are ethnic Chinese. The Malaysian migrant community there has grown at a rate of about 6% over the last decade. Other receiving countries are Australia, Brunei, United States and United Kingdom.
Malaysia too has its immigrants. According to the 2000 census, 1.3 million or 5.9% of the country’s population are foreigners. As of this moment, that figure may have swelled to 4 million. But these are mainly uneducated and unskilled workers from Indonesia and Southern Philippines. They are encouraged to settle here to create racial dominance. So, for political expediency, the country has sacrificed quality for quantity. What can you say about that?
Why is there such a big outflow of skilled people? There are two main reasons for this: the push and pull factors. On the domestic front, the push factors are corruption, social inequality, lack of religious freedom and educational opportunities and the government’s affirmative action policies. Outside, the pull factors are better career opportunities, better compensation and a better quality of life.
Singapore is the chief beneficiary of this brain drain. The island nation takes in about 57 of the total diaspora. Of this, 90% are ethnic Chinese. The Malaysian migrant community there has grown at a rate of about 6% over the last decade. Other receiving countries are Australia, Brunei, United States and United Kingdom.
Malaysia too has its immigrants. According to the 2000 census, 1.3 million or 5.9% of the country’s population are foreigners. As of this moment, that figure may have swelled to 4 million. But these are mainly uneducated and unskilled workers from Indonesia and Southern Philippines. They are encouraged to settle here to create racial dominance. So, for political expediency, the country has sacrificed quality for quantity. What can you say about that?
Thursday, March 31, 2011
Will the sun shine again
Japan was inflicted with the triple disaster of a magnitude 9.0 earthquake, 10 m high wave tsunami and the resulting nuclear radiation crisis on 11 March 2011. The destruction was widespread and extensive. The cost of the damages is estimated to be about US$309 billion and an estimate of US$200 billion is required for the rebuilding of homes, factories, roads and bridges. So, where is the government going to get all this money?
The Japanese government is already the most indebted among the advanced nations. Its public debt is equal to 200% of its GDP – about US$10 trillion. This has been accumulated over the last two decades when, the government, in an attempt to stimulate the economy, spent an enormous sum to build infrastructures like bridges to nowhere and concrete jungles along the shorelines. How much more debt can it take on?
The saving grace is that this 126 million people nation is rich. Japanese households sock away a massive savings of US$18 trillion. 95% of the public debt is funded by local institutions and its citizens. All of this at near-zero interest rate. The country also has a foreign reserve of US$1 trillion.
The government may issue more Japanese Government Bonds (JGBs) to fund reconstruction. But the domestic life insurance companies and the Government Pension Investment Fund may not be able to absorb much more of the new JGBs as they have to support more pension-related costs due to the aging population. That means foreigners will be expected to pick up some of the new JGBs. But, they will only do so at a much higher interest rate. This (higher interest rate) the Japanese government definitely cannot afford to pay.
However grim the situation may look today, you can be sure that the Japanese will rise again. It is their indomitable spirit and stoical character that will make them prevail. Just give them a decade and see.
The Japanese government is already the most indebted among the advanced nations. Its public debt is equal to 200% of its GDP – about US$10 trillion. This has been accumulated over the last two decades when, the government, in an attempt to stimulate the economy, spent an enormous sum to build infrastructures like bridges to nowhere and concrete jungles along the shorelines. How much more debt can it take on?
The saving grace is that this 126 million people nation is rich. Japanese households sock away a massive savings of US$18 trillion. 95% of the public debt is funded by local institutions and its citizens. All of this at near-zero interest rate. The country also has a foreign reserve of US$1 trillion.
The government may issue more Japanese Government Bonds (JGBs) to fund reconstruction. But the domestic life insurance companies and the Government Pension Investment Fund may not be able to absorb much more of the new JGBs as they have to support more pension-related costs due to the aging population. That means foreigners will be expected to pick up some of the new JGBs. But, they will only do so at a much higher interest rate. This (higher interest rate) the Japanese government definitely cannot afford to pay.
However grim the situation may look today, you can be sure that the Japanese will rise again. It is their indomitable spirit and stoical character that will make them prevail. Just give them a decade and see.
Thursday, March 24, 2011
Global Financial Integrity (GFI) has reported that Malaysia had an illicit financial outflow of US$291 billion (RM889 billion) in the period from 2000 to 2008. This is an enormous amount of money – equal to 150% of its 2009 GDP. Malaysia ranked fifth among countries with huge outflows. Critically, the first 4 countries are much larger economies like China, Russia, Mexico and Saudi Arabia. So, can Malaysia, a small economy, afford such a huge outflow?
Why is there such a big outflow from the country? Foremost, it must be ill gotten gains which need a safe haven such as a Swiss bank account. The ‘dirty’ money could be from corruption, kickbacks from contracts and other illegal means. The people that are involved are mainly politicians, government officials and other people in power. There is evidence that corruption is becoming more rampant in Malaysia. Transparency International’s ranking of how corruption-free Malaysia is has declined from position 36 in 2000 to 56 in 2010.
The Bumiputra policy has irked many business people in the country. Some of them feel that it is better to spread their eggs i.e. have some of their wealth stored outside the country. They do this in the guise of geographical diversification of their businesses. This also leads to an outflow of funds.
Malaysia’s income distribution is highly skewed. This means there is an inordinate number of high net worth individual in the country. These people are highly mobile and are likely to transfer some of their wealth outside the country.
Why is there such a big outflow from the country? Foremost, it must be ill gotten gains which need a safe haven such as a Swiss bank account. The ‘dirty’ money could be from corruption, kickbacks from contracts and other illegal means. The people that are involved are mainly politicians, government officials and other people in power. There is evidence that corruption is becoming more rampant in Malaysia. Transparency International’s ranking of how corruption-free Malaysia is has declined from position 36 in 2000 to 56 in 2010.
The Bumiputra policy has irked many business people in the country. Some of them feel that it is better to spread their eggs i.e. have some of their wealth stored outside the country. They do this in the guise of geographical diversification of their businesses. This also leads to an outflow of funds.
Malaysia’s income distribution is highly skewed. This means there is an inordinate number of high net worth individual in the country. These people are highly mobile and are likely to transfer some of their wealth outside the country.
Thursday, February 24, 2011
The poor Chinaman
Even though China has overtaken Japan as the world’s second largest economy in 2010, its GDP per capita ranked #86 out of 164 countries in 2009. Japan was ranked 19. China’s GDP per capita in 2010 was $4,300. In comparison, that for the US and Japan are $47,100 and $42,500 respectively. Both are nearly 10 times bigger than China.
The US GDP was $14.62 trillion in 2010. Those for China and Japan are $5.74 and $5.39 trillion respectively. So, when will the Chinese economy surpass the US? Some say 2020 while others predict 2025. But one thing is for sure, this is an inevitable event.
China’s inflation rate for January 2011 was 4.9%. But, this is not necessary a bad thing. As wages outpace productivity, workers’ share of the economy will rise – thus boosting consumption. Wage- driven inflation would help to narrow China’s trade surplus through a higher price for its exports. This could be a better way of rebalancing the economy than an outright appreciation of the Yuan. The latter modus operandi would cause big job losses in export firms. A gradual appreciation of the Yuan would also be unpalatable as it attracts large speculative capital inflows.
Inflation would help accelerate China’s GDP in US$ terms. Any appreciation of the Yuan would be helpful too. Whatever it is, a GDP per capita of $4,300 has ample room to grow. China has the technology and the entrepreneurial drive needed for growth. So, there should be no surprise that China would eventually be the number 1 economy someday.
The US GDP was $14.62 trillion in 2010. Those for China and Japan are $5.74 and $5.39 trillion respectively. So, when will the Chinese economy surpass the US? Some say 2020 while others predict 2025. But one thing is for sure, this is an inevitable event.
China’s inflation rate for January 2011 was 4.9%. But, this is not necessary a bad thing. As wages outpace productivity, workers’ share of the economy will rise – thus boosting consumption. Wage- driven inflation would help to narrow China’s trade surplus through a higher price for its exports. This could be a better way of rebalancing the economy than an outright appreciation of the Yuan. The latter modus operandi would cause big job losses in export firms. A gradual appreciation of the Yuan would also be unpalatable as it attracts large speculative capital inflows.
Inflation would help accelerate China’s GDP in US$ terms. Any appreciation of the Yuan would be helpful too. Whatever it is, a GDP per capita of $4,300 has ample room to grow. China has the technology and the entrepreneurial drive needed for growth. So, there should be no surprise that China would eventually be the number 1 economy someday.
Thursday, February 10, 2011
The myth on Japanese productivity
The US GDP for 2010 is about 15.3 trillion while that for Japan is 5.1 trillion. In terms of GDP per capita, the US is at $47,132 compared to Japan’s $33,828. This means the US is still far more productive than Japan. In actual fact, Japan’s overall productivity rate is only 72% that of the US.
The American worker remains the most productive in the world. Germany comes in second. Next is Japan. The US’s biggest productivity lead is in services. In manufacturing, Japan is more productive in machine tools, consumer electronics and motor vehicles. However, it is far behind the US in telecommunications and software industries.
Japan’s productivity growth rate was high in the 1970s and 1980s. This was due to strong government involvement in the economy and the permanent employment system. However, this same stimulus is now hindering Japan’s productivity. Japanese manufacturers now have some of the world’s highest production costs. Overregulation – be it governmental or company-wide, is stifling Japan’s productivity growth. That’s why Japanese consumers are paying on average one-third more for goods and services than Americans.
The American worker remains the most productive in the world. Germany comes in second. Next is Japan. The US’s biggest productivity lead is in services. In manufacturing, Japan is more productive in machine tools, consumer electronics and motor vehicles. However, it is far behind the US in telecommunications and software industries.
Japan’s productivity growth rate was high in the 1970s and 1980s. This was due to strong government involvement in the economy and the permanent employment system. However, this same stimulus is now hindering Japan’s productivity. Japanese manufacturers now have some of the world’s highest production costs. Overregulation – be it governmental or company-wide, is stifling Japan’s productivity growth. That’s why Japanese consumers are paying on average one-third more for goods and services than Americans.
Sunday, January 30, 2011
Steve Jobs
Below is a description of Steve developed by a Wharton's advanced management programme class which I think is very good.
Steve Jobs's natural talent is to imagine not only what consumers want now but also what they will want in the future -- and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably.
He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he's striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status.
He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into rabid fans. He builds their trust in him, in Apple, and in the Apple brand.
Steve Jobs's natural talent is to imagine not only what consumers want now but also what they will want in the future -- and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably.
He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he's striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status.
He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into rabid fans. He builds their trust in him, in Apple, and in the Apple brand.
Tuesday, January 25, 2011
Suicides in Foxconn
‘In 20 years, there will be only 2 companies: Foxconn will make everything and Wal-Mart will sell them.’ That may be a joke. But it does give an indication of how huge Foxconn is.
Foxconn was founded by Terry Gou in 1974. Today it is a colossal contract manufacturer of electronics employing over 800,000 people in more than 20 factories across China. Its revenue is about $55 billion in 2010. It does business with renowned companies like IBM, Cisco, Microsoft, Nokia, Sony, Hewlett-Packard and Apple.
Its factory in Longhua, Shenzhen has a workforce of 300,000 and occupies an area of 2.1 sq. km. It is a self-contained campus with all the basic facilities like hospital, restaurants, banks, Olympic-sized swimming pool, grocery store, internet cafe and a bookstore.
A spate of suicides brought the firm to the limelight. A lot is said about stress being the cause of the suicides – the workers do long hours under inhospitable conditions and poor living conditions in the dormitories. However, there may be a twist to this. It is suspected that some of them may have done it for money. The average worker earns about 2000 Yuan per month. But, the company pays 100,000 Yuan compensation to the family of anyone dying on site. To the unstable 20 year-old, the thought of that much money going to their parents could be attractive.
Foxconn was founded by Terry Gou in 1974. Today it is a colossal contract manufacturer of electronics employing over 800,000 people in more than 20 factories across China. Its revenue is about $55 billion in 2010. It does business with renowned companies like IBM, Cisco, Microsoft, Nokia, Sony, Hewlett-Packard and Apple.
Its factory in Longhua, Shenzhen has a workforce of 300,000 and occupies an area of 2.1 sq. km. It is a self-contained campus with all the basic facilities like hospital, restaurants, banks, Olympic-sized swimming pool, grocery store, internet cafe and a bookstore.
A spate of suicides brought the firm to the limelight. A lot is said about stress being the cause of the suicides – the workers do long hours under inhospitable conditions and poor living conditions in the dormitories. However, there may be a twist to this. It is suspected that some of them may have done it for money. The average worker earns about 2000 Yuan per month. But, the company pays 100,000 Yuan compensation to the family of anyone dying on site. To the unstable 20 year-old, the thought of that much money going to their parents could be attractive.
Monday, January 3, 2011
World car production
In 2009, China became the world’s largest car manufacturing country. It produced a total of 13.79 million units. Out of this, 4.57 million units or 44% were from domestic branded companies. However, total export was only 332400 units – which mean that its domestic consumption is more than 13.4 million units. In comparison, Japan and USA produced 7.93 million and 5.7 million units respectively in the same year.
In contrast, Japan has seen a decline in the number of vehicles produced. From 11.6 million units in both 2007 and 2008, it came down to 7.93 in 2009.
For 2010, China is targeted to produce a total of about 16.4 mil vehicles. Japan will remain as the no.2 with a projected figure of 8.87 mil. The US will have a good year in car production and is expected to cross the line at 7.8 mil. Next is Germany with a total of 5.77 mil.
South Korea came in fifth and produced a total of 3.5 mil vehicles in 2009. It is expected to churn out 4.2 mil units in 2010. Of this, 63% or 2.67 mil units will be exported. Its manufacturers are very aggressively pushing new and improved models. Expect them to up their production and exports as well.
India is a country with a huge potential market for vehicles. Its current production is about 1.0 mil. Expect their factories to increase their output when the consumption power improves.
Asia now produces about 30 mil vehicles a year or about half the world production. With increasing demand coming from Asia, it can be expected that Asia will be the new vehicle manufacturing hub of the world.
In contrast, Japan has seen a decline in the number of vehicles produced. From 11.6 million units in both 2007 and 2008, it came down to 7.93 in 2009.
For 2010, China is targeted to produce a total of about 16.4 mil vehicles. Japan will remain as the no.2 with a projected figure of 8.87 mil. The US will have a good year in car production and is expected to cross the line at 7.8 mil. Next is Germany with a total of 5.77 mil.
South Korea came in fifth and produced a total of 3.5 mil vehicles in 2009. It is expected to churn out 4.2 mil units in 2010. Of this, 63% or 2.67 mil units will be exported. Its manufacturers are very aggressively pushing new and improved models. Expect them to up their production and exports as well.
India is a country with a huge potential market for vehicles. Its current production is about 1.0 mil. Expect their factories to increase their output when the consumption power improves.
Asia now produces about 30 mil vehicles a year or about half the world production. With increasing demand coming from Asia, it can be expected that Asia will be the new vehicle manufacturing hub of the world.
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