June 13th, 2011
12:35 PM GMT
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Jakarta, Indonesia (CNN) - It's becoming an area of spirited debate in government and financial circles - what is and isn't a BRIC country and how should they be classified?

One one side of the arguement is BRIC creator Jim O'Neill at Goldman Sachs and his supporters. In 2000 O'Neill put together a group of four countries –Brazil, Russia, India and China - which he considered would rank uppermost in the list of most economically important countries within 40 or so years.

Their size was already or would be, in the not too distant future, 3%-5% of the global economy.

It turned out to be not only a prescient forecast but a golden marketing term for the four countries as they continued to surge ahead in economic might and importance.

Soon after that somone else suggested the BRIC block to include South Korea. Nothing to do with Jim O'Neill.

In fact according to a paper published in 2005, South Korea and Mexico were considered in the original group but were left out because they were thought more developed and were already members of the OECD.

Then along came the BRICS, the "S" denoting South Africa. Again, nothing to do with Jim O'Neill.

As some more cynical economists have noted it was more to do with a political move, pushed forward by China to include a resource-rich region that China is anxious to develop ties with.

Others say that South Africa should denote the region - Africa as a whole - which would tick many BRIC boxes.

And so it goes. As the emerging world forges ahead and western economies hesitatingly recover from the financial crisis the call for inclusion in the BRIC block becomes louder.

Indonesia is now pressing its claim. BRIIC anyone?

Judging by the response from senior business leaders and opinion-makers at the World Economic Forum in Jakarta it has a strong case.

The head of McKinsey Worldwide, and the head of Standard Chartered Bank in Asia, senior members of the World Economic Forum itself and even the CEO of Unilever gave the thumbs up to Indonesia.

Even WEF founder Klaus Schwab was heard to utter the word I-BRIC.

Indonesia's investment minister, and a former Goldman man himself, says he's keen to get Mr O'Neill down to Indonesia to take a look for himself.

But here's the question. Can the term now be picked up and used by any politician or pundit, or does it make sense for the people who invented it, to keep it updated and relevant?

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June 6th, 2011
06:18 PM GMT
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Singapore (CNN) – The airline industry is tough. No doubt about it. Between 2000-2010 the group of 230 airlines that make up the International Air Transport Association (IATA) managed to post just three profitable years as a group. In 2006, 2007 and 2010 they collectively earned $39 billion dollars. In the other seven years they racked up losses of $68 billion dollars, according to IATA figures. Yes, billion.

Yet during that time only a handful of well-known carriers - Swissair, Varig, Ansett, Sabena, Mexicana and Aloha among others - disappeared. How did the others manage to survive?

There are still about 1000 carriers worldwide, says IATA. The question is why.

May 26th, 2011
03:26 AM GMT
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Hong Kong, China (CNN) – So the gloves are off.

The four BRIC countries plus South Africa have joined forces to oppose the automatic choice of a European as head of the IMF.

This is significant step.

For the first time there is a unified voice from the emerging world to match the voice of Europe, now rallying behind French Finance Minister Christine Lagarde.

From a gaggle of un-coordinated statements from emerging economies over the past two weeks, comes a crystal clear - and powerful - voice.

A message jointly signed by China, India, Brazil, Russia and South Africa. They wrote: "We believe that, if the Fund is to have credibility and legitimacy, its Managing Director should be selected after broad consultation with the membership. It should result in the most competent person being appointed as Managing Director, regardless of his or her nationality. We also believe that adequate representation of emerging market and developing members in the Fund's management is critical to its legitimacy and effectiveness."

But the ball is still in their court. The next step is a candidate the emerging economies can rally behind.


March 14th, 2011
12:37 PM GMT
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Toyota, Nissan and Honda all chart big drops as markets react to the Japanese quake. CNN's Andrew Stevens reports.

June 9th, 2010
02:08 AM GMT
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It’s been more than a decade since I was last in Ho Chi Minh City.  The city then was dusty, noisy, frantic and, well, disorganized – a lot of energy but not a lot of focus.

But there are very few cities in Asia that you can return to after 10-year absence and expect things to be the same (except, perhaps, for Yangon and Colombo). Ho Chi Minh in 2010 is booming. The familiar landmarks are still there but this city is spreading - upwards and outwards.

This is what 10 years of an average annual growth of 7 percent looks like: The streets are even more clogged with motorbikes but now compete with a stream of Toyotas, Kias and Fords. The city center is clean - the dust in the air now is from building sites rather than badly-paved roads. (From my hotel room looking across the bustling Saigon River I can see perhaps 20 cranes perched on top of semi-completed high-rises.)

The brand name stores are starting to appear although still – some would say thankfully –no sign of McDonald’s.

To say Vietnam is open for business is an understatement – and this Southeast Asian growing powerhouse is deadly serious about drawing foreign business.

The World Economic Forum’s East Asia meeting chose Ho Chi Minh City (or Saigon, if you prefer) for its first event in a true emerging market. Organizers were expecting about 250 to 300 business people this week, but more than 400 came from across the world.

The government is out in force too. Prime Minister Nguyen Tan Dung is everywhere, chatting up the opportunities. He wants Vietnam to be Asia’s manufacturing base of choice after China.

It’s a tall order, and at the moment Vietnam is seen as a production base for lower value-added goods like textiles, furniture or footwear.

But times are changing. Samsung and Canon are both investing heavily in electronics manufacturing and service bases. Most of the big Asian carmakers as well as Ford are producing for the local market with an eye on exports later down the line.

I met Tom Schneider, a German businessman who has just outlaid $12 million to build a tanning factory at an industrial park on the outskirts of Ho Chi Minh City.

Forthright and ebullient, Schneider’s built eight factories in Asia in the past 16 years. In Vietnam it took him just 22 months, from finding the land, building the factory, and training the workforce – his fastest project anywhere.

He now produces 80,000 hides a month, enough for about 1.5 million pairs of shoes. Timberland is his biggest customer.

And he’s quick to point out that although tanning is “environmentally hostile” his new plant is greener than his existing plant in China, which has received a silver medal standard for environmental protection from Timberland.

So why move to Vietnam?  It’s cheaper. Labor costs are about 60 percent of China’s although senior management is still more expensive. The country is close to many of his key customers, and there’s little state intervention, as long he observes workplace and environmental standards.

And in the long run, Vietnam has key access to a vast and cheap labor pool across the borders of Cambodia and Laos.

It’s not all upside. Transport links are still – as Tom describes – at the same level as China in 1988. And the law is still open to interpretation (nearly all big foreign investors insist in any contract on having litigation settled in an offshore court).

Foreign investment is coming. In 2008 about $70 billion was committed to Vietnam, up more than threefold from five years year. It’s fallen back to $20 billion last year. Not surprising, though, given the global economic picture.

I asked the Prime Minister how he would describe Vietnam’s economic model.

Vietnam, he replied, is a socialist system embracing capitalism. Helping the poor get out of poverty through foreign investment is key to his planning, he says.

Like China, Vietnam’s government looks long-term. And like China, it appears to be achieving its economic goals.

November 15th, 2009
10:04 AM GMT
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SINGAPORE – The talk was about global rebalancing. U.S. President Barack Obama arrived in Asia on his first official tour, talking about a "rare inflection point in history". A time where "we have the opportunity to take a different path." A chance to rebalance the model where Asia consumers consume more and US exporters export more.

Chinese President Hu Jintao was among world leaders at the APEC summit in Singapore.
Chinese President Hu Jintao was among world leaders at the APEC summit in Singapore.

APEC leaders fully endorsed the strategy; virtually every economy in the world does. But look inside the APEC meeting in Singapore, and see the problems of turning this into reality. One of the biggest may be China.

More than two years ago, China began to allow its currency to appreciate against the dollar. By the time the financial crisis exploded, it had risen in value by about 20 percent. The crisis was the signal for China to freeze the exchange rate there at about 6.83 to the US dollar.

That was a year ago. Even China's Asian trade partners are now worried that the Chinese yuan is undervalued against the sinking dollar. So one of the key issues in Singapore was to put subtle pressure on China to unfreeze its currency.

Finance ministers talked about flexible exchange rates, the APEC leaders were expected to talk to about "market oriented" exchange rates - all aimed at prodding China to become a little more "market oriented" in its own exchange rates.

But by the end of the gathering, all reference to market-oriented exchange rates in the final statement from leaders had been erased. There had been debate behind closed doors between the U.S. and China about the statement. In the end China appears to have won out.

The message seem to be China will move only when its ready. And for all its newfound goodwill and push for re-engagement, there's not much the U.S. can do about that.

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Filed under: APECAsiaFinancial marketsMoneyUnited States

November 9th, 2009
02:48 PM GMT
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I've got my own piece of Berlin Wall stuffed away somewhere in my house. I had borrowed a hammer and chisel from a man at the wall and hacked off my very own piece.

West Berliners crowd in front of the Berlin Wall as they watch East German border guards demolish a section of the wall.
West Berliners crowd in front of the Berlin Wall as they watch East German border guards demolish a section of the wall.

It was a week after "Checkpoint Charlie" - a crossing point between Easy and West Germany - in Berlin had been thrown open, a week after a divided city and a divided Germany were reunited.

I had flown over from London with friends for a first-hand view of history. We arrived late on a snowy Friday evening, found a cheap place to stay and headed out into the night. Every bar, every cafe was packed with exuberant West Germans and uncertain East Germans. But everywhere we went, the air of German brother/sisterhood was palpable. Everyone was so positive. We were all Germans, they told us. It would be a seamless unification. Only a few people voiced their concern about how exactly this would work.

We stayed up all night, drinking and talking to Germans. In the morning we headed for the checkpoint ourselves. It was packed with people; all along the wall people were busy trying to knock it down. One other snapshot that still stays with me is the East Germans pulling overloaded shopping baskets full of consumer goods back across the dividing zone to their homes. Little things like washing up trays for the kitchen sink, boot polish, soft drinks. Anything, as long as it wasn't made in the German Democratic Republic.

We snatched a few hours sleep that afternoon and went back out into the night to join the party. The feeling of optimism was still burning.

Well, as history shows, reunification turned out to be much harder, more expensive and longer than anyone could have seen. A few months after the wall came down I visited the former East Germany working on a story about East Germany Inc. being up for sale. An enormous firesale of outdated factories and machinery. Buyers were only interested in the property, and as long as they could get rid of most of the workforce.

Fast forward to today. Think of another communist economy. And think of the difference. This economy is leading the world out of recession, this economy is, at the moment, one of the great hopes for global economic growth, this economy now lectures the U.S. on economic policy. This economy is China. Two decades ago this day, East German communism was finally put to rest. In China, it's going from strength to strength.

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August 15th, 2009
01:52 AM GMT
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HONG KONG, China - "Asia's astonishing rebound", says the front cover in today's edition of The Economist newspaper (yes, they call it a newspaper). It is astonishing, too, when you look at the headline economic numbers coming out of the region at the moment.

Asia’s steady rise: Can it continue without consumers in the U.S. and Europe increasing their spending?
Asia’s steady rise: Can it continue without consumers in the U.S. and Europe increasing their spending?

Take second-quarter economic growth for example: China up 7.9 percent, Hong Kong up 3.3 percent, South Korea up 2.3 percent, and even poor, lumbering out-of-shape Japan is expected to break its 18-month recession on Monday with Q2 growth of 1 percent. In Europe, recession is ending, too. But look at the numbers. Germany and France can manage growth of just 0.3 percent in the second quarter; Britain and Spain are still in recession.

Why? Why are these export-driven Asian economies leading the global recovery, when their key markets are still only now just stirring after the knockdown punch of the global crisis of late last year?

In a word: stimulus. It's not just China's $585 billion funneling into the economy; it's also Japan's $150 billion, and South Korea and Hong Kong's $11 billion apiece. Tax breaks, enormous investment projects, and government-funded property incentives all helped to keep the Asian consumer afloat, and generate economic growth. Restocking in the United States and Europe also helped, as companies broke from their deep-freeze and started building up inventories.

But. ... and there is a big one here: In its current form it's not sustainable. Asian policy-makers have done a remarkable job lifting economic growth out of the gutter, but until the real engines of global growth get off the ropes, the Asian rebound isn’t going to go anywhere.

What's needed is strong, sustained demand from consumers in the U.S., Europe AND Asia. It's starting in Asia, but this is still an export-focused region.

Glenn Maguire, chief economist at Soc-Gen, says it will be decades before Asian economies have rebalanced so that domestic demand can keep economies growth healthy by itself. And here's a clear statistic to back that up: Maguire says the U.S. consumer market in 2007 was about $10 trillion. China, by contrast, was $1 trillion. Even taking into account the rest of Asia (except Japan) but including India it comes to about $2 trillion. Some other estimates put the total at $4 trillion, but you can see Asia is still a long way behind.

It's a given that the U.S. consumer has changed his/her buying habits. Job security and rock-bottom home values and big, big personal debts will do that. It will be a long time, perhaps many years if ever, before the U.S. consumer, or for the matter the European consumer, is prepared to go on the sort of buying binge we've seen build up during the past two decades.

That means lower economic growth, for all of us, for a long time to come.

April 21st, 2009
02:32 PM GMT
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If it looks like a duck and sounds like a duck it's probably a duck, right? Wrong. Just ask the Rolls-Royce motor company. It is mightily unimpressed by a concept car produced by Chinese carmaker Geely, on display for the first time at this year's Shanghai auto show.

At first glance you can see why.

Chinese automaker Geely unveiled its GE in Shanghai.
Chinese automaker Geely unveiled its GE in Shanghai.

Geely has produced the GE which looks uncannily like the Rolls-Royce Phantom: from the iconic bonnet (hood) ornament - the Spirit of Ecstasy - to the stately and equally recognizable grille. Even the rear end tapers in on the Geely.

Now you may have expected Rolls to shrug it off, to look down its aristocratic nose and smile benevolently at an upstart paying it a sort of back-handed compliment.

Absolutely not. In the whispering, highly refined world of top-end luxury marques, Rolls was pulling no punches.

"Yes, I've had a good look at it," said Richard Carter, head of worldwide communications for the fabled British carmaker, now owned by BMW.

"It's a copy and we are frankly disappointed with Geely."

Geely's response is to say it's absolutely not a copy. It's an entirely original design, and what's more they really don't want to get into a discussion about it.

Take a look at the pictures and decide for yourself.

Copying is nothing new in the auto industry. The Japanese did it, the Koreans did it and the Chinese are now doing it, said Michael Dunne of auto research house, JD Power.

It's a long-standing joke in the auto industry that R&D stands not for Research and Design, but Receive and Duplicate.

But why is Rolls-Royce so sensitive? After all, it's not likely anyone will buy a Geely GE (if it ever makes it to production) in the mistaken belief it's a Roller. And Rolls-Royce says it can't imagine the car, even if it were in production, having an impact on its own profits.

What Rolls' action does show, according to Dunne, is just how concerned the global auto industry is by the imminent arrival of China on the world stage.

He added that it will take perhaps three to five years for China to start competing against the likes of the mass-produced family cars from Europe, Japan and Korea. It will take longer at the luxury end.

But in the meantime the non-Chinese automakers are sending a message to China that it cannot take anything for granted as it makes its way up the value chain.

It's a tough industry, especially in these times, and no one is going to get a free ride.

Rolls-Royce, quite understandably, defends its reputation vigorously against anyone who uses its designs without asking. This is no exception.

The question, though, is what can Rolls-Royce actually do about it.

"Western auto makers have taken Chinese carmakers to court in the past over what they see as major copyright infringements, but so far they have never won a case," said Dunne.

But, if the reaction of Rolls-Royce, is anything to go by they are not going to stop trying.

October 1st, 2008
03:53 PM GMT
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HONG KONG, China – "A non-perfect plan is better than no plan at all." So said International Monetary Fund chief Dominique Strauss-Khan in a recent interview. He was talking about the amended and reworked bailout plan going before the U.S. Senate.

But even if the plan is perfection itself, and the credit markets start trusting and loving each other again, we are not out of the woods. Not by a long shot. We then come to the next depressing piece of news: the real economy.

Take a look at this number. It was lost in the hullaballoo of the Dow's rise and bailout hopes yesterday. U.S. house prices in July were 16.3 percent lower than they were in July of last year. And house prices are also falling faster. The much-watched Case-Shiller home index, released by Standard and Poor's, reported the price of a home in the 20-city nationwide index fell 0.9 percent in July, compared with an 0.5 percent fall in June.

Overall prices are are now about 20 percent down from their peak in July 2006. And the really bad news is that many economists now say the fall may not stop until mid-2010.

That could be as much as another 20 months of falling home values, assuming the financial crisis is solved sooner rather than later. And that's the problem. The millions of U.S. homeowners were the backbone of the consumer spending boom that led U.S. economic growth. They're now AWOL. They aren't spending because not only is the value of their biggest asset disappearing before their eyes, they are also worrying increasingly about their jobs and their mortgage rate. Who's going to buy a new car with that in the back of their mind?

And there's no one else to pick up the spending mantle. We've seen the government attempt to kick-start the economy with a tax rebate a little earlier this year. That boost lasted all of a few weeks.

So bring on the bailout. It's just the start of a long and painful road to get the world's biggest economy back on track.

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